The Regulatory Environment: FSMA, FCA,
PRA, Statutory objectives, Conduct risk
Questions with Verified Correct Answers
What is the Financial Services and Markets Act (FSMA) 2000?
The primary legislation regulating financial services in the UK, effective in 2001, aimed at
providing stronger consumer protection.
What major change did the Financial Services Act 2012 introduce?
It amended FSMA and established the current regulatory structure, replacing the Financial
Services Authority (FSA) with three bodies: FCA, PRA, and FPC.
What does FCA stand for?
Financial Conduct Authority
What is the primary focus of the FCA?
Conduct regulation, protecting consumers, promoting competition, and maintaining a stable
financial services industry.
What does PRA stand for?
Prudential Regulation Authority
What is the main concern of the PRA?
Prudential regulation, focusing on the safety and soundness of financial firms.
What does FPC stand for?
Financial Policy Committee
What is the role of the FPC?
To address macroeconomic issues, financial issues, and systemic risks that could threaten the
UK economy.
What is the 'twin peaks' regulatory approach?
, A framework with two main supervisory focuses: prudential regulation by the PRA and conduct
regulation by the FCA.
How are the FCA and PRA funded?
They are funded entirely through fees paid by the firms they regulate.
What is the General Prohibition under Section 19 of FSMA?
It is a criminal offence to carry on a regulated activity by way of business in the UK unless the
person is authorized or an exempt person.
What is the Financial Ombudsman Service (FOS)?
An organization that investigates and determines complaints made by eligible complainants,
overseen by the FCA.
What does the Financial Services Compensation Scheme (FSCS) provide?
A safety net for customers when a regulated firm cannot meet its obligations regarding valid
claims.
What significant change occurred to the PRA in 2016?
The PRA became part of the Bank of England and established a Prudential Regulation
Committee (PRC) for micro-prudential regulation.
What types of entities does FSMA apply to?
It applies to natural persons, firms, incorporated bodies, partnerships, trusts, and other
unincorporated associations.
What are the statutory objectives of the FCA?
To protect consumers, enhance market integrity, and promote competition.
What are the statutory objectives of the PRA?
To promote the safety and soundness of regulated firms and contribute to the stability of the UK
financial system.
What is the exam formula for the General Prohibition?
Regulated activity + by way of business + UK must be authorized OR exempt to avoid criminal
offence.
What is the main focus of the PRA?
PRA, Statutory objectives, Conduct risk
Questions with Verified Correct Answers
What is the Financial Services and Markets Act (FSMA) 2000?
The primary legislation regulating financial services in the UK, effective in 2001, aimed at
providing stronger consumer protection.
What major change did the Financial Services Act 2012 introduce?
It amended FSMA and established the current regulatory structure, replacing the Financial
Services Authority (FSA) with three bodies: FCA, PRA, and FPC.
What does FCA stand for?
Financial Conduct Authority
What is the primary focus of the FCA?
Conduct regulation, protecting consumers, promoting competition, and maintaining a stable
financial services industry.
What does PRA stand for?
Prudential Regulation Authority
What is the main concern of the PRA?
Prudential regulation, focusing on the safety and soundness of financial firms.
What does FPC stand for?
Financial Policy Committee
What is the role of the FPC?
To address macroeconomic issues, financial issues, and systemic risks that could threaten the
UK economy.
What is the 'twin peaks' regulatory approach?
, A framework with two main supervisory focuses: prudential regulation by the PRA and conduct
regulation by the FCA.
How are the FCA and PRA funded?
They are funded entirely through fees paid by the firms they regulate.
What is the General Prohibition under Section 19 of FSMA?
It is a criminal offence to carry on a regulated activity by way of business in the UK unless the
person is authorized or an exempt person.
What is the Financial Ombudsman Service (FOS)?
An organization that investigates and determines complaints made by eligible complainants,
overseen by the FCA.
What does the Financial Services Compensation Scheme (FSCS) provide?
A safety net for customers when a regulated firm cannot meet its obligations regarding valid
claims.
What significant change occurred to the PRA in 2016?
The PRA became part of the Bank of England and established a Prudential Regulation
Committee (PRC) for micro-prudential regulation.
What types of entities does FSMA apply to?
It applies to natural persons, firms, incorporated bodies, partnerships, trusts, and other
unincorporated associations.
What are the statutory objectives of the FCA?
To protect consumers, enhance market integrity, and promote competition.
What are the statutory objectives of the PRA?
To promote the safety and soundness of regulated firms and contribute to the stability of the UK
financial system.
What is the exam formula for the General Prohibition?
Regulated activity + by way of business + UK must be authorized OR exempt to avoid criminal
offence.
What is the main focus of the PRA?
