CII R01 EXAM QUESTIONS AND ANSWERS
Financial Services and Markets Act 2000 (FSMA) - Answers :- Brought together the
regulation of all sectors of the UK financial services industry under one regulatory
system - the FSA
Introduced FOS and FSCS
set out the rules for all regulated activities when dealing with:
• deposit taking
• stocks and shares
• gilts and local authority bonds
• debentures
• futures
• unit trusts
• open-ended investment companies (OEICs)
Financial Services Authority (FSA)
Disbanded - Answers :- In 2013
- Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) formed
- Reforms clarified responsibilities between:
HM Treasury and Bank of England in the event of a financial crisis, Chancellor of the
Exchequer directs the Bank of England where public funds are at risk to financial
stability.
Financial Policy Committee (FPC) - Answers :- Committee within the Bank of England
allows:
1. scrutiny towards emerging risks to the financial system as a whole
2. Powers to take action where it identifies threats.
Prudential Regulation Authority (PRA) - Answers :- Works with the Bank of England but
is independent.
- Responsibility for the prudential supervision and
authorisation of important financial institutions such as banks and firms
- Ensure that individual firms can fail without bringing
down the entire financial system.
- 'judgment based' approach to supervision,
Prudential Regulation Committee (PRC) makes the PRA decisions.
UK regulatory structure - Answers :1. HM Treasury & Parliament
2. The Bank of England: comprising the (PRA), the
F(FPC), and the (PRC)
3. Financial Conduct Authority (FCA)
Memorandum of Understanding - Answers :1998 & 2006
, ...is a document that outlines of an agreement that two or more parties have reached.
Financial Conduct Authority objectives - Answers :1. Protection for consumers
2. Enhance integrity of financial system
3. Promote effective competition
4. Regulates firms not covered by PRA
5. Competition powers, product intervention, power to enforce disclosure and power to
take formal action
Principles of good regulation - Answers :1. Efficiency and economy
2. proportionality
3. sustainable growth
4. consumer responsibility
5. senior managers responsibility
6. openness and disclosure
Prudential Regulatory Authority objectives - Answers :1. Responsible regulation big
firms and banks
2. Accountable to parliament
3. Promote competition in markets
4. promote safety of firms
Financial Policy Committee (FPC) - Answers :Responsible for contributing to the BoE
financial stability objective by:
1. identifying and monitoring systemic threats to financial stability
2: taking action to reduce or remove those threat and support
Bank of England - Answers :To maintain:
Monetary stability = Stable prices and confidence in the currency.
Financial Stability = financial markets, management of risk and arrangement of
payments
Through financial operations (lending)
Financial Policy Committee and PRA
Treasury responsibilities - Answers :1. Financial services policy
2. Oversight of taxation
3. Ensuring sustainable economic growth
Competition and Markets Authority (CMA) - Answers :1. Investigate mergers which
could restrict competition.
2. Undertake market studies and investigations where there is competition and
consumer problems.
Pensions regulator - Answers :1. Regulates uk work based schemes
2. Aims to protect the employee and improve their understanding.
Financial Services and Markets Act 2000 (FSMA) - Answers :- Brought together the
regulation of all sectors of the UK financial services industry under one regulatory
system - the FSA
Introduced FOS and FSCS
set out the rules for all regulated activities when dealing with:
• deposit taking
• stocks and shares
• gilts and local authority bonds
• debentures
• futures
• unit trusts
• open-ended investment companies (OEICs)
Financial Services Authority (FSA)
Disbanded - Answers :- In 2013
- Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) formed
- Reforms clarified responsibilities between:
HM Treasury and Bank of England in the event of a financial crisis, Chancellor of the
Exchequer directs the Bank of England where public funds are at risk to financial
stability.
Financial Policy Committee (FPC) - Answers :- Committee within the Bank of England
allows:
1. scrutiny towards emerging risks to the financial system as a whole
2. Powers to take action where it identifies threats.
Prudential Regulation Authority (PRA) - Answers :- Works with the Bank of England but
is independent.
- Responsibility for the prudential supervision and
authorisation of important financial institutions such as banks and firms
- Ensure that individual firms can fail without bringing
down the entire financial system.
- 'judgment based' approach to supervision,
Prudential Regulation Committee (PRC) makes the PRA decisions.
UK regulatory structure - Answers :1. HM Treasury & Parliament
2. The Bank of England: comprising the (PRA), the
F(FPC), and the (PRC)
3. Financial Conduct Authority (FCA)
Memorandum of Understanding - Answers :1998 & 2006
, ...is a document that outlines of an agreement that two or more parties have reached.
Financial Conduct Authority objectives - Answers :1. Protection for consumers
2. Enhance integrity of financial system
3. Promote effective competition
4. Regulates firms not covered by PRA
5. Competition powers, product intervention, power to enforce disclosure and power to
take formal action
Principles of good regulation - Answers :1. Efficiency and economy
2. proportionality
3. sustainable growth
4. consumer responsibility
5. senior managers responsibility
6. openness and disclosure
Prudential Regulatory Authority objectives - Answers :1. Responsible regulation big
firms and banks
2. Accountable to parliament
3. Promote competition in markets
4. promote safety of firms
Financial Policy Committee (FPC) - Answers :Responsible for contributing to the BoE
financial stability objective by:
1. identifying and monitoring systemic threats to financial stability
2: taking action to reduce or remove those threat and support
Bank of England - Answers :To maintain:
Monetary stability = Stable prices and confidence in the currency.
Financial Stability = financial markets, management of risk and arrangement of
payments
Through financial operations (lending)
Financial Policy Committee and PRA
Treasury responsibilities - Answers :1. Financial services policy
2. Oversight of taxation
3. Ensuring sustainable economic growth
Competition and Markets Authority (CMA) - Answers :1. Investigate mergers which
could restrict competition.
2. Undertake market studies and investigations where there is competition and
consumer problems.
Pensions regulator - Answers :1. Regulates uk work based schemes
2. Aims to protect the employee and improve their understanding.
