Financial Services Regulation (FCA) Flashcards

What are the three statutory objectives of the Financial Conduct Authority (FCA)?

Answer: Consumer protection, market integrity, and promoting competition

The FCA has three operational objectives: (1) securing an appropriate degree of protection for consumers, (2) protecting and enhancing the integrity of the UK financial system, and (3) promoting effective competition in the interests of consumers. These are set out in the Financial Services and Markets Act 2000 (as amended).

What is the difference between the FCA and the PRA in the UK regulatory framework?

Answer: The FCA focuses on conduct regulation for all firms, while the PRA is the prudential regulator for systemically important firms

The FCA is the conduct regulator for approximately 50,000 financial services firms and the prudential regulator for those not supervised by the PRA. The PRA (part of the Bank of England) is the prudential regulator for around 1,500 systemically important firms including banks, building societies, and major insurers, focusing on their financial soundness.

Under FCA rules, what must a firm do before providing personal investment advice to a retail client?

Answer: Conduct a suitability assessment including the client's knowledge, experience, financial situation, and investment objectives

Before providing a personal recommendation, a firm must assess suitability by gathering information about the client's knowledge and experience, financial situation, and investment objectives (including risk tolerance). This ensures the advice is appropriate for the individual client's circumstances, as required by the FCA's Conduct of Business Sourcebook (COBS).

What is the purpose of the FCA's Treating Customers Fairly (TCF) initiative?

Answer: To ensure firms deliver fair outcomes for consumers throughout the product lifecycle

TCF requires firms to demonstrate that they consistently deliver fair outcomes for consumers. The six consumer outcomes cover areas including confidence in dealing with firms, products designed to meet client needs, clear information, suitable advice, acceptable service standards, and no unreasonable barriers to switching or claiming.

What is the FCA's approved persons regime (now replaced by SM&CR)?

Answer: A regime requiring individuals performing certain controlled functions to be assessed and approved by the FCA

The approved persons regime (now largely replaced by the Senior Managers and Certification Regime — SM&CR) required individuals performing significant influence functions or customer-facing functions to be individually approved by the FCA. SM&CR extends accountability by requiring senior managers to have clear statements of responsibilities.

What is 'market abuse' as defined under UK regulation?

Answer: Behaviour including insider dealing, market manipulation, and unlawful disclosure of inside information

Market abuse under the UK Market Abuse Regulation (UK MAR) covers insider dealing (trading on material non-public information), unlawful disclosure of inside information, and market manipulation (artificially influencing the price or value of a financial instrument). These are both civil and criminal offences.