U2: T17 - THE FCA'S AIMS AND OBJECTIVES Flashcards
A major clearing bank has its headquarters in London but operates in many other countries. It is regulated by:
a) the PRA.
b) the PRA and the FPC.
c) the FCA.
d) the PRA and the FCA.
D)
A financial provider of this nature would be regarded as systemically important. It would be regulated by the PRA in relation to its prudential status and the FCA in relation to its conduct of business.
Getting to grips with the different sections of the FCA Handbook can be a challenge! To check your understanding of what you have read so far, in which sections of the FCA Handbook would you look for information on each of the following?
a) Training and competence requirements.
b) Rules surrounding the sale of mortgages.
c) General rules about conduct of business.
d) Rules relating to consumer credit.
e) Rules relating to compensation and complaints.
a) High Level Business Standards
b) Business standards – specifically, the Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB).
c) Business standards – specifically, Conduct of Business Sourcebook (COBS).
d) Specialist sourcebooks – specifically, the Consumer Credit sourcebook (CONC).
e) Redress.
The main driver for changes to the regulatory structure governing financial services that were introduced in 2013 was:
a) the collapse of Barings Bank.
b) the weaknesses exposed by the 2007–09 financial crisis and a number of mis‐selling scandals.
c) the deregulation of banks and building societies.
d) the need to respond to changes in lifestyle.
Answer is b)
The weaknesses exposed by the 2007–09 financial crisis and a number of major mis‐selling scandals drove the changes to regulatory bodies in 2013.
The FCA’s role is to identify and address risks that may threaten the stability of the economy as a whole.
True or false?
False. This is the key role of the FPC, the Financial Policy Committee.
The FCA is the conduct regulator for all firms within the financial services industry and the prudential regulator for firms that are not considered systemically important.
Explain what is meant by:
a) conduct regulation.
b) prudential regulation.
c) systemically important.
Answer is A)
Conduct regulation requires firms to ensure that products and services they supply to consumers meet the consumers’ needs, and to act appropriately and deal fairly with consumers.
Name the three operational objectives of the FCA.
i) Protecting consumers by securing an appropriate degree of protection;
ii) Protecting financial markets, by protecting and enhancing the integrity of the UK financial system;
iii) Promoting effective competition by promoting effective competition in the interests of consumers.
What is the difference between ‘rules’ and ‘guidance’ in the FCA Handbook?
Rules impose binding obligations and firms can face sanctions for not complying with them.
Guidance explains the rules and indicates ways in which firms can comply but is not binding and firms are not required to follow it.
Name four powers that the FCA can exercise in its regulation of business conduct.
Competition powers;
product intervention powers;
power of disclosure;
power to take formal action against misleading financial promotions.
Which one of the following is not one of the FCA ‘Principles for Businesses’ with which a firm must comply?
A firm must:
a) communicate with customers in a clear manner.
b) conduct its business with integrity.
c) maintain an independent compliance function.
d) observe proper standards of market conduct.
Answer is C)
The FCA principles do not specifically require a firm to maintain an independent compliance function.
The FCA Handbook contains a section on redress. This section of the Handbook is primarily concerned with:
a) sales policy.
b) recruitment standards.
c) maintaining and developing skills and knowledge.
d) complaints and compensation.
D) The redress sourcebook is concerned with complaints and compensation.
Which of the following is the phrase used by the FCA to summarise its requirements for effective communication designed to ensure the fair treatment of customers?
Information must be:
a) accurate, up to date and detailed.
b) clear, fair and not misleading.
c) brief, clear and accurate.
d) concise, written in plain English and truthful.
Answer is b)
Information must be clear, fair and not misleading.
What are the six outcomes for retail customers that a firm must aim to deliver to demonstrate that it is providing fair treatment to its customers?
1) Consumers will be confident that the firms they are dealing with are committed to fair treatment of customers.
2) Products are designed to meet the needs of properly identified customer groups.
3) Consumers are provided with clear information at all stages, before, during and after a sale.
4) Any advice given is suitable for the customer, taking account of their circumstances.
5) Products perform as customers have been led to expect, and associated services are of an acceptable standard.
6) There are no unreasonable barriers to switching product or provider, making a claim, or complaining.
Which of these institutions is not a part of the Bank of England?
A) Financial Policy Committee (FPC)
B) Prudential Regulation Authority (PRA)
C) Financial Conduct Authority (FCA)
D) Prudential Regulation Committee (PRC)
C) Financial Conduct Authority (FCA) is not part of the BoE
Which of the following two are regulators?
A) Financial Policy Committee (FPC)
B) Prudential Regulation Authority (PRA)
C) Financial Conduct Authority (FCA)
B) Prudential Regulation Authority (PRA)
C) Financial Conduct Authority (FCA)
What term describes:
‘Regulation requiring firms that provide products and services to consumers to ensure that those products and services’ meet the consumer’s need, and to act appropriately and to deal fairly with consumers’
Conduct regulation
What term describes:
‘Regulation aimed at ensuring business’ are established and urn on a sound financial basis. The aim is to lessen the risk of the business failing and if failure does occur, to limit any adverse impact on consumers and the wider economy’
Prudential regulation
Who are the FCA Prudential Regulators for?
A) PRA-regulated firms
B) Non-PRA-Regulated firms
B) Non-PRA-Regulated firms
Who regulates deposit takers?
A) PRA only
B) FCA only
C) PRA + FCA
D) BoE
C) Both FCA and PRA because deposit takers are regulated for prudential supervision by PRA, conduct supervision by FCA
