UK regulatory framework

Question 1

Who were the UK regulatory, voluntary body until 2005?

Answer 1

General Insurance Standards Council (GISC) - membership was voluntary not compulsory

Question 2

In 2005, the UK insurance market saw a shift from voluntary regulation to statutory regulation under which act/organisation?

Answer 2

Financial Services Authority

Financial Services and Markets Act - set out details of how the FSA should function and gave the FSA regulatory power over general insurance companies, intermediaries and Lloyds

Question 3

What is the current structure of financial services since 2013? (3 bodies)

Answer 3

FCA - Financial Conduct Authority

PRA - Prudential Regulation Authority

FPC - Financial Policy Committee

Question 4

Who are the FPC?

Answer 4

Financial Policy Committee - group within the Bank of England responsible for monitoring emerging risks and look at the regulatory structure as a whole

Question 5

Who are the FCA?

Answer 5

Financial Conduct Authority - independent body who are responsible for conduct of ALL firms holding financial capital (insurers, banks etc.), aim to promote healthy competition in the industry and set guidelines around conduct

Question 6

Who are the PRA?

Answer 6

Prudential Regulation Authority - sit within the Bank of England and are responsible for the stability of the industry and aims to protect policyholders and promote competition

Question 7

What act puts the Bank of England at the <3 of UK financial stability?

Answer 7

Bank of England and Financial Services Act 2016

PRA became part of the bank, and the Prudential Regulation Committee was established which operates alongside the FPC and the Monetary Policy Committee

Question 8

What are threshold conditions set by the PRA?

Answer 8

Minimum requirements that firms must meet to carry out regulated activities and are designed to promote safety and soundness.

Examples include;

Firms head office to be in the UK
Business to be conducted in a prudent manner
Appropriately staffed
Capable of supervision

Question 9

What is the PRA’s judgement led approach?

Answer 9

Approach to supervision which moves away from rules to a forward thinking analysis (idea is to pre-empt risks)

Question 10

Intensity of supervision by PRA - what is baseline monitoring?

Answer 10

Minimum supervision firms face under the PRA and includes ensuring things like compliance, reserving and annual reviews are carried out.

Question 11

What is the PRA’s proactive intervention framework (PIF)

Answer 11

Framework used to judge how close a firm is to failure - 5 markers the PRA look at

Question 12

Who is the lead regulator of Lloyd’s?

Answer 12

PRA

Question 13

What is the FCA’s overarching strategic objective?

Answer 13

To protect and enhance confidence in the UK financial system

Also aims to protect consumers, promote competition and protect integrity of the UK financial system

Question 14

How does the FCA categorise firms?

Answer 14

Fixed portfolio- large insurers and brokers who have a FCA supervisor frequently in contact with them

Flexible portfolio - smaller firms which recieve less contact from the FCA

Question 15

What are the 3 pillars of the FCA’s risk framework?

Answer 15

• firm systematic framework (designed to assess a firms conduct)
• event driven work (looks at past/emerging risks)
• issues qnd products (looks a reviews of issues and products)

Question 16

The FCA has the power to intervene in order to prevent detriment - true or false?

Answer 16

True

Question 17

The FCA and PRA have the power to publish the fact that a warning notice has been issued about a firm - true or false?

Answer 17

True

Question 18

How many principles of good business practice are there?

Answer 18

11!

Integrity

Skill, care and diligence

Management and control

Financial prudence

Market conduct

Customers interests

Communications with clients

Conflicts of interest

Customers relationships of trust

Clients assets

Relationship with regulators

Question 19

What does sysc stand for (management and control)?

Answer 19

Set of rules known as senior management arrangements, systems and controls- states that an Oversight Officer must be appointed who is responsible for monitoring regulated activities (must be an approved person)

Question 20

What is a MLRO in regards to financial crime?

Answer 20

Money laundering reporting officer

Question 21

What is whistleblowing?

Answer 21

An employee who exposes information about a company (usually their own company)

Public interest and disclosure act looks at whistleblowing

Question 22

Why was the public interest disclosure act created?

Answer 22

Act concerns whistleblowing and was created to encourage openness within a company (i.e. its okay to speak up)

Act protects those who disclose information in the interest of the public from detriment by their employer

Question 23

Under the public interest and disclosure act, what is a qualifying disclosure?

Answer 23

When a worker reveals they believe a criminal offence, failure to comply with legal obligations, health and safety risks etc aren’t complied with

Question 24

Controlled functions should only be carried out by those who meet the appropriate standards - true or false?

Answer 24

True- controlled functions should be carried out by authorised persons

Question 25

What is the purpose of the fit and proper test for approved persons?

Answer 25

Test applied to each approved person in regards to their honesty, competence and financial soundness (basically makes sure the approved person is up to scratch)

Question 26

What is the senior managers and certification regime?

Answer 26

Came into force as a result of Solvency II (law which ensures insurance companies don’t go bankrupt)

Introduced new regulatory framework which focused more on senior individuals holding key roles

Gov introduced a duty of responsibility which means senior managers must take reasonable steps to prevent a breach

Question 27

What are the 3 parts of the senior managers and certification regime?

Answer 27

Senior managers regime - applies to those performing senior roles in a firm

Certification regime - applied to those who aren’t carrying out senior managers functions but deemed capable of harm to the firm/customers

Rules of conduct

Question 28

The SM&CR introduced a new framework which replaced the approved persons regime - true or false?

Answer 28

True

Purpose of the framework is to deal with individual accountability

Question 29

Which body is responsible for regulating market issues?

Answer 29

FCA

Question 30

Which org has overall responsibility for promoting fair competition in the interests of consumers?

Answer 30

Competition and Markets Authority

Question 31

What is a retail mediation activity? (Required by the FCA)

Answer 31

Information required by the FCA in order to assess their regulatory position- information must be submitted through the system Gabriel

Larger firms may be required to report quarterly