UNIT 2 The FCA’s Aims And Activities Flashcards
The main driver for changes to the regulatory structure governing financial services that were intorduced 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 deregualtion of banks and building societies
D) the need to respond to change in lifestyle
B) the weaknesses exposed by the 2007-09 financial crisis and a number of mis-selling scandals
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 Financial Policy committee (FPC)
The FCA is the conduct regulator for all firms within the financial services industry and the prudential regulator for firms that are not considered systematically important. Explain what is menat by:
A) conduct regulation
B) prudential regulation
C) systematically important
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.
B) prudential regulation aims to ensure that businesses are established and run on a sound financial basis, to limit the risk of a business failing and to minimise the impact on consumers and the wider economy if a business does fail.
C) systematically important refers to financial institutions that play a key role in the national and global economy. If they were to fail, it would have a significant adverse impact on the national or global financial system.
Name the three operational objectives of the FCA?
Protecting consumers by securing an appropriate degree of protection.
Protecting financial markets by protecting and enhancing the integrity of the UK financial system
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 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
Powers of disclosure
Power to take formal action against misleading financial promotions
Which one of the following is not one of the FCA ‘Principles for business’ with which a firm must comply
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
C) 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) 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?
A) accurate, uo to date and detailed
B) clear, fair and not misleading
C) brief, clear and accurate
D) concise, written in omain engkish and truthful
B) 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?
Consumers will be confident that the firms they are dealing with are committed to fair treatment of customers.
Products are designed to meet the needs of properly identified customer groups
Consumers are provided with clear information at all stages, before, during and after sale.
Any advice given is suitable for the customer, taking account of their circumstances
Products perform as customers have been led to expect, and associated services are of an acceptable standard
There are no unreasonable barriers to switching product or provider, making a claim, or complaining.
What is Regulation and Supervision?
Regulation
The body of rules created by various regulatory bodies to which participants must adhere to.
Supervision
The range of activities undertaken by regulators to ensure that participants adhere to regulatory requirements
Explain the roles of -
Bank of England
Financial policy committee
Prudential regulation authority
Prudential regulation committee
Bank of England - maintain economic stability. Responsible for enhancing and protecting the economy. Central to UK regulation of financial services.
Financial policy committee - within the Bank of England. Identify and address risks that threaten the whole economy. No direct regulatory responsibility but has powers to action against threats of stability.
Prudential regulation authority - within the Bank of England. Sole responsibility for prudential supervision of banks and other financial institutions. Authorises large and systematically important banks, insurance companies and building societies.
Prudential Regulation committee - within the Bank of England. The powers of the PRA are exercised by the PRC.
Financial conduct authority - has responsibility for the conduct of all retail and wholesale financial firms. Also undertakes prudential supervision of firms not regulated by PRA.
FCA responsible of all conduct regulation. Also some prudential regulation for firms not systematically important.
PRA - responsible prudential regulation for firms that are systematically important.
What is ‘with-profits business’
With-profits business
Relates to certain life insurance policies by life assurance companies. In addition to the sum assured the policyholder receives a share of the profits either during the term (reversionary) or at maturity or on death (terminal)
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) the PRA and the FPC
A financial provider of this size would be regarded as systematically important.
It would be regulated by the PRA in regards to prudential regulation and the FCA in regards to conduct of business.
In which Sections of FCA handbook would you find details on-
Training and competence requirements
Rules surrounding sale of mortgages
General rules about conduct of business
Rules relating to consumer credit
Rules relating to compensation and complaints
Training and competence - High level standards.
Rules surrounding sale of mortgages - Business standards, specifically the mortgages and home finance: Conduct of business source book (MCOB)
General rules about conduct of business - Business standards, specifically - Conduct of business source book (COBS)
Rules relating to consumer credit - Specialist source books, specifically, the consumer credit sourcebook (CONC)
Rules relating to compensation and complaints - Redress
