CII R01 FCA Regulatory Framework 3 — Questions and Answers
Question 1: What is the FCA's approach to regulation often described as?
- Rules-based only
- Principles-based and outcomes-focused (Correct answer)
- Self-regulation by industry
- Government-directed regulation
Correct answer: Principles-based and outcomes-focused
The FCA uses a principles-based, outcomes-focused approach to regulation, setting high-level principles and expected outcomes rather than prescribing detailed rules for every situation.
Question 2: What is the purpose of the FCA's Perimeter Guidance Manual (PERG)?
- To set out the physical boundaries of FCA offices
- To help firms determine whether their activities are regulated (Correct answer)
- To define the geographical areas where FCA rules apply
- To outline the maximum size of regulated firms
Correct answer: To help firms determine whether their activities are regulated
PERG helps firms and individuals understand whether their activities fall within the regulatory perimeter and therefore require FCA authorisation.
Question 3: What power does the FCA have under section 166 of FSMA 2000?
- Power to set interest rates
- Power to commission skilled persons reports (Correct answer)
- Power to close a firm's bank accounts
- Power to appoint the firm's board members
Correct answer: Power to commission skilled persons reports
Section 166 gives the FCA the power to require a firm to appoint a skilled person to produce a report on any matter relevant to the firm's compliance. This is a key supervisory tool.
Question 4: What is the FCA Register?
- A list of all UK banks only
- A public record of firms and individuals authorised or registered by the FCA (Correct answer)
- A private database accessible only to FCA staff
- A register of all financial products sold in the UK
Correct answer: A public record of firms and individuals authorised or registered by the FCA
The FCA Register is a public database that contains details of firms, individuals, and other bodies that are, or have been, regulated by the FCA or PRA. Consumers can use it to check authorisation status.
Question 5: What is a 'Part 4A permission' in FCA regulation?
- Permission to operate in four EU countries
- Permission granted by the FCA to carry on regulated activities (Correct answer)
- Permission to exceed capital requirements by 4%
- Permission for a firm to have four approved persons
Correct answer: Permission granted by the FCA to carry on regulated activities
Part 4A of FSMA 2000 sets out the framework for granting permissions to firms to carry on one or more regulated activities. This is the core authorisation that firms need.
Question 6: Which body is responsible for setting prudential standards for systemically important banks in the UK?
- The FCA
- The Prudential Regulation Authority (PRA) (Correct answer)
- HM Treasury
- The Competition and Markets Authority
Correct answer: The Prudential Regulation Authority (PRA)
The PRA, part of the Bank of England, is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers, and major investment firms.
CII R01 FCA Regulatory Framework 3
What is the FCA's approach to regulation often described as?