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UK Regulation and Professional Integrity - Jul 2024 > Unit 5 - Uk Regulatory Infrastucture (6 of 80) > Flashcards

Unit 5 - Uk Regulatory Infrastucture (6 of 80) Flashcards

1
Q

Who does the PRA regulate? (4)

A

Banks and building societies

Credit unions

Insurers

Systemically importand investment firms

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2
Q

What does the FCA regulate? (3)

A

Conduct across the whole financial services,

Market supervision

Prudential supervision of firms not supervised by PRA

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3
Q

Who established the FPC and what is its role?

A

Bank of England

Macro-prudent regulation (the stability and resilience of the whole financial system

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4
Q

What is the primary role of the PRA?

A

to contribute to the promotion of the stability of the UK financial system through the micro-prudential regulation of banks etc

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5
Q

What is the secondary objective of the PRA?

A

‘facilitate the international competitiveness of the UK economy and its medium to long-term growth (subject to international standards)’

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6
Q

What is the relationship between the PRA and BoE?

A

Following the entry into force of the Bank of England and Financial Services Act 2016, the PRA status changed from being a subsidiary of the BoE to being part of the bank.

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7
Q

What is the single strategic objective of the FCA?

A

to ensure that the relevant markets are functioning well

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8
Q

What are the 3 operational objectives of the FCA?

A

1) protect consumers from bad conduct (protect consumers)

2) protect the integrity of the UK financial system (market stability)

3) promote effective competition in the interests of consumers (effective competition).

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9
Q

How does the FCA view “credible deterrence”?

A

using enforcement as a regulatory tool – selecting cases to enforce against to send a strong and clear message to other firms not to engage in wrongful activity

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10
Q

Who is the auditor of the FCA?

A

The National Audit Officer (NAO) with the power to carry out value-for-money reviews. HMT can also carry out economy, efficiency and effectiveness reviews

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11
Q

Who is the FCA directly accountable to?

A

HM Treasury

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12
Q

How does HM Treasury oversee the FCA? (4)

A
  1. HM Treasury has the power to appoint or dismiss the FCA’s board and chairperson.
  2. The FCA must carry out an investigation and report to HM Treasury if there has been a significant regulatory failure.
  3. Provide an annual report on progress.
  4. HM Treasury has the power to commission reviews and inquiries into aspects of the FCA’s operations.
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13
Q

What is the role of BoE in the economy?

A

in effecting economic policy, by being given the ability to set interest rate levels through its MPC

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14
Q

How is the FPC structured and how does it meet its objectives of market stability?

A

makes recommendations and gives directions to the PRA on specific actions that should be taken in order to achieve its objectives

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15
Q

What is the role of the Competition and Market Authority?

A

Its role is to promote competition for the benefit of consumers, both within and outside the UK

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16
Q

How does the CMA fulfil its role? (8)

A

1) investigating mergers

2) conducting market studies/investigationjs where there may be competition and consumer problems

3) investigating anti-competitive agreements breaches and abuses of dominant positions

4) bringing criminal proceedings against individuals who commit the cartel offence

5) enforcing consumer protection legislation

6) cooperating with sector regulators and encouraging them to use their competition powers

7) providing info to individuals/businesses about rights under competition/consumer law, and

8) provide advice, reporting and monitoring in relation to government subsidies.

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17
Q

What is the Information Commissioner’s Office (ICO) and which act does it enforce?

A

1) to uphold information rights in the public interest

2) promoting openness by public bodies

3) promote data privacy for individuals

Data Protection Act (DPA) 2018

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18
Q

What is TPR?

A

the UK regulator of work-based pension schemes

19
Q

What is the purpose of the FOS?

A

to provide quick resolution of disputes between eligible complainants and their product/ service providers with a MINIMUM OF FORMAILITY, by an independent person

20
Q

What is the relationship between the FOS/FSCS and FCA?

A

The chairperson and other directors of the FOS & FCSC are appointed by the FCA, but the terms of their appointment must be such as to secure their independence from the FCA. The FCA requires an annual report on both.

21
Q

What is the role of the FSCS?

A

to provide a safety net for customers of financial services firms which become unable to repay them - If an authorised financial services firm becomes insolvent, the customers can make a claim under the FSCS for compensation

22
Q

What is the role of the Upper Tribunal (Tax and Chancery)?

A

it UK-wide jurisdiction in tax cases and references against decisions of the FCA, PRA, TPR, HM Treasury and BoE

23
Q

Which type of FCA decisions can be appealed?

A

1) Authorisation and permission

2) Penalties for market abuse

3) Disciplinary measures

4) Official listings

24
Q

How does the PRA achieve its primary objective? (4)

A

1) ensuring that any firms that fail avoid significant disruption to financial services

2) emphasising resolution planning to permit orderly failure

3) cooperating closely with the FPC and the FCA to ensure macro- and micro-prudential regulation is aligned across the markets, and

4) working with the FCA and others to ensure the UK authorities have a strong voice in international policy making.

25
Q

What are the enforcement powers of the PRA?

A

imposing financial penalties and publishing censures for cases when sanctions are inappropriate

26
Q

How can the FCA publish warnings and what are the conditions?

A

The FCA is able to publish details of a warning notice proposing disciplinary action, to signal the start of formal enforcement proceedings.

However, the FCA has to consult the recipient of the warning notice before publishing

27
Q

What are the FCA’s 12 Principles for Businesses?

A
  1. Integrity
  2. Skill, care and diligence
  3. Management and controls.
  4. Financial prudence
  5. Market conduct
  6. Customers’ interests
  7. Communication with clients
  8. Conflicts of interest
  9. Customers: relationships of trust
  10. Clients’ assets
  11. Relations with regulators
  12. Consumer Duty
28
Q

What is the relationship between the FCA and CMA with regard to competition?

A

in respect of financial services, the CMA and the FCA have ‘CONCURRENT powers’ and the FCA is a ‘concurrent regulator’.

29
Q

What are the 8 PRA fundamental rules?

A
  1. conduct its business with integrity
  2. conduct its business with due skill, care and diligence
  3. act in a prudent manner
  4. at all times maintain adequate financial resources
  5. have effective risk strategies and risk management systems
  6. organise and control its affairs responsibly and effectively
  7. deal with its regulators in an open and cooperative way
  8. prepare for resolution
30
Q

Examples of Recognised Investment Exchanges (RIE), Overseas RIE (ROIE)and DIE?

A

RIE = LSE

ROIE = NASDAQ

DIE = NYSE

31
Q

Difference between ROIE and Designated Investment Exchange (DIE)?

A

ROIEs = based outside the UK, but carry on regulated activities within the UK

DIEs = they do not offer membership and access to participants based in the UK. Instead, the designated status indicates that the exchange is regulated and supervised to standards that the FCA believes meet certain criteria

32
Q

Example of RCH?

A

LCH.Clearnet

33
Q

What is and Multilateral Trading Facility (MTF) and examples?

A

MTF = bring together multiple parties (eg, retail investors or other investment firms) that are interested in buying and selling financial instruments and enables them to do so - operated by an investment firm or a market operator

Examples include firms such as Brokertec, MarketAxess, Tradeweb, Creditex and Bloomberg.

34
Q

What is an Organised Trading Facility (OTF)?

A

An OTF is a multilateral system that is not a regulated market or an MTF (equities not allowed so for bonds, derivatives etc)

35
Q

Who determines when a company can join the Official List and AIM?

A

FCA determines which companies are eligible to join the Official List

LSE determines which companies are eligible to join AIM

36
Q

Who has authority to change the remit of the PRA and FCA?

A

Parliament

37
Q

What is the penalty for unauthorised carrying out of regulated activities?

A

2 years improsonment and/or a fine

38
Q

How long does the FCA have to consider a new Unit Trust application?

A

6 months (but typically within 6 weeks)

39
Q

What were the 3 top reforms of the Edinburgh Reforms?

A
  • Replacing packaged retail and insurance-based investment products (PRIIPs) rules:
  • Designing a new UK Short Selling Regime.
  • Review of the Senior Managers & Certification Regime (SM&CR
40
Q

Which financial instruments are covered by MiFID II?

A
  • transferable securities (such as shares and bonds)
  • money market instruments
  • units in collective investment undertakings (ie, unit trusts, OEICS)
  • options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, emission allowances or other derivatives instruments, financial indices or financial measures
  • options, futures, swaps, forwards and any other derivative contracts relating to commodities that must be settled in cash
  • options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled
  • credit derivatives
  • financial contracts for differences (CFDs)
  • options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates or inflation rates or other official economic statistics t
  • emission allowances consisting of any units recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme).
41
Q

Which financial instruments are NOT covered by MiFID II?

A
  • cash deposits (not structured)
  • spot FX
42
Q

What is the EU Prospectus Regulation?

A

once a prospectus has been approved by a home state listing authority, it must be accepted for the purpose of listing or public offers throughout all EU member states

43
Q

What is the Capital Requirements Directive (CRD) and what are the 3 pillars implemented from the Basel framework>

A

‘firms need to have financial resources in excess of their regulatory financial resource requirements’

  • Pillar 1 – minimum capital requirements for credit, market and operational risks.
  • Pillar 2 – supervisory review – establishing a constructive dialogue between a firm and the regulator on the risks, the risk-management and capital requirements of the firm.
  • Pillar 3 – market discipline – robust requirements on public disclosure intended to give the market a stronger role in ensuring that firms hold an appropriate level of capital.
44
Q

What does the European Markets Infrastructure Regulation (EMIR) cover?

A

over-the-counter (OTC) derivatives (centrally cleared)

UK Regulation and Professional Integrity - Jul 2024 (12 decks)

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