FCA REGULATIONS EXAM
FSMA 2012 Regulator's - Answers- FCA - Regulate firms conduct
PRA - Regulate safety & financial soundness
Monetary Stability - Answers- Monetary policy committee (MPC) controls inflation
Financial stability - Answers- Financial policy committee (FPC) - Macro focus directing
PRA
PRA - Micro focus on individual firms
PRA Objective - Answers- Promote the safety & soundness of banks, insurers and
other deposit takers. Also work on special resolutions regimes (winding down banks)
FCA Powers - Answers- Supervise all firms conduct
Prudential supervision for non PRA firms
Authorise firms & approve persons
Authority for listing & prospectus
FCA Objectives (strategic and operational (PIC) - Answers- Strategic - Ensure markets
function well
Operational - Protect consumers
Integrity of markets
Competition
FCA is accountable to - Answers- The treasury (HMT)
General prohibition S19 FSMA 2000 - Answers- A person must be authorised to carry
out a regulated activity relating to a specified investment unless exempt or the activity
excluded
Penalties for breaching general prohibition - Answers- Magistrates - 6 months, £5000
fine
Crown - 2 years, unlimited fine
Non Specified or designated investments - Answers- Property, commodities or any
tangible asset
Options on commodities (unless precious metals)
Spot FX, Premium bonds & National savings
Fixed odds betting, letters of credit
Excluded activities (DEMOTe) - Answers- Dealing as principle
Employee share schemes
Media (advice)
Overseas person (unsolicited and only if not promoting in UK)
Trustees (unpaid)
, Exempt Persons (APRIL) - Answers- Appointed representations (e.g X firms only sells y
products, y takes responsibility)
Professional body members
Recognised investment exchanges & clearing houses
Certain Institutions (e.g central banks)
Llyods members
Recognised entities - Answers- RIE & ROIE are recognised by the FCA and RCH are
recognised by the BOE and thus exempt from regulations
Key principles for business which must be followed by all authorised firms - Answers- 1.
Integrity
2. Skill care and dilligence
3. Mgmt & control
4. Financial prudence
5. Market conduct
6. Customer interessts
7. Communications with clients
8. Conflicts of interest
9. Customer trust
10. Client assets
11. Relations with regulators
12. Consumer duty (New principle)
Principle 12 Consumer duty obligations - Answers- Act in good faith to retail customers
Avoid causing foreseeable harm to retail customers
Enable and support customer to pursue their financial objectives
FCA supervision - Answers- 1. Pro active supervision - For Fixed portfolio firms (Large
firms e.g HSBC) there is a named FCA supervisor and a pre emptive approach with 12-
36 month cycle of meetings and reviews
2. Reactive supervision - Flexible portfolio firms, dealing with issues that emerge
FCA Supervisory tools (RIDE) - Answers- Remedy
Identify
Diagnose
Evaluate
Senior Managers & Certification Regime (SM&CR) - Answers- A process where key
senior individuals are approved by the regulator, and assigned key responsibilities, who
then internally assess the fitness of any other employee who poses risk to customers or
firm "material risk taker"
Controlled Functions - Answers- 1. Governing Functions
2. Customer Dealing functions
FSMA 2012 Regulator's - Answers- FCA - Regulate firms conduct
PRA - Regulate safety & financial soundness
Monetary Stability - Answers- Monetary policy committee (MPC) controls inflation
Financial stability - Answers- Financial policy committee (FPC) - Macro focus directing
PRA
PRA - Micro focus on individual firms
PRA Objective - Answers- Promote the safety & soundness of banks, insurers and
other deposit takers. Also work on special resolutions regimes (winding down banks)
FCA Powers - Answers- Supervise all firms conduct
Prudential supervision for non PRA firms
Authorise firms & approve persons
Authority for listing & prospectus
FCA Objectives (strategic and operational (PIC) - Answers- Strategic - Ensure markets
function well
Operational - Protect consumers
Integrity of markets
Competition
FCA is accountable to - Answers- The treasury (HMT)
General prohibition S19 FSMA 2000 - Answers- A person must be authorised to carry
out a regulated activity relating to a specified investment unless exempt or the activity
excluded
Penalties for breaching general prohibition - Answers- Magistrates - 6 months, £5000
fine
Crown - 2 years, unlimited fine
Non Specified or designated investments - Answers- Property, commodities or any
tangible asset
Options on commodities (unless precious metals)
Spot FX, Premium bonds & National savings
Fixed odds betting, letters of credit
Excluded activities (DEMOTe) - Answers- Dealing as principle
Employee share schemes
Media (advice)
Overseas person (unsolicited and only if not promoting in UK)
Trustees (unpaid)
, Exempt Persons (APRIL) - Answers- Appointed representations (e.g X firms only sells y
products, y takes responsibility)
Professional body members
Recognised investment exchanges & clearing houses
Certain Institutions (e.g central banks)
Llyods members
Recognised entities - Answers- RIE & ROIE are recognised by the FCA and RCH are
recognised by the BOE and thus exempt from regulations
Key principles for business which must be followed by all authorised firms - Answers- 1.
Integrity
2. Skill care and dilligence
3. Mgmt & control
4. Financial prudence
5. Market conduct
6. Customer interessts
7. Communications with clients
8. Conflicts of interest
9. Customer trust
10. Client assets
11. Relations with regulators
12. Consumer duty (New principle)
Principle 12 Consumer duty obligations - Answers- Act in good faith to retail customers
Avoid causing foreseeable harm to retail customers
Enable and support customer to pursue their financial objectives
FCA supervision - Answers- 1. Pro active supervision - For Fixed portfolio firms (Large
firms e.g HSBC) there is a named FCA supervisor and a pre emptive approach with 12-
36 month cycle of meetings and reviews
2. Reactive supervision - Flexible portfolio firms, dealing with issues that emerge
FCA Supervisory tools (RIDE) - Answers- Remedy
Identify
Diagnose
Evaluate
Senior Managers & Certification Regime (SM&CR) - Answers- A process where key
senior individuals are approved by the regulator, and assigned key responsibilities, who
then internally assess the fitness of any other employee who poses risk to customers or
firm "material risk taker"
Controlled Functions - Answers- 1. Governing Functions
2. Customer Dealing functions
