How The FCA Ensures Ethical Outcomes For Consumers

Question 1

What is ethics?

Answer 1

Moral principles that govern a person’s behaviour or the conducting of an activity.

Question 2

How does the FCA makesure individuals and businesses act ethically?

Answer 2

Principles - high level, not comprehensive, expected to be stuck to.

Outcomes - sets out what good outcomes would be for consumers.

Monitors results using data provided and through its own monitoring lists and activities.

Question 3

What are the principles for the FCA in regards to ethics? 11

Answer 3

Integrity
Skill and diligence
Management and control
Financial prudence
Market conduct
Consumers interest
Communications with customers
Conflicts of interest
Customer trust
Client assets
Relationship with regulators

Question 4

If there is a conflict between the FCA rules and FCA principles, which will take precedence?

Answer 4

The principles

Question 5

What is threshold condition 5?

Answer 5

Proof the firm is suitable under fit and proper rules.

Question 6

Does being compliant with the principles mean a firm has met threshold condition? 5

Answer 6

No.

Question 7

What are the 4 principles that apply to all people performing a controlled function? ISMO

Answer 7

Integrity
Skill, care, and diligence
Market conduct
Open and co-operative

Question 8

What are the 3 principles that apply to accountable higher management functions

Answer 8

Organisation and control
Skill, care, and diligence in management
Compliance

Question 9

What is meant by integrity for an individual?

Answer 9

Was the individual truthful?
Did they do the right thing for the customer

Question 10

What is meant by skill, care, and diligence as an individual?

Answer 10

Did the individual carry out the right level of care.
Did they have the necessary skills
Did they act with diligence in the performance of their duties

Question 11

What is meant by market conduct of an individual?

Answer 11

Whether right practices have been demonstrated by the extent the person followed codes of conduct and other rules within their own market. These rules differ depending on the buisness type they undertake.

Question 12

What is meant by open and co-operative of the individual?

Answer 12

In dealings with the regulator have they followed the firms internal compliance procedure.
Ie whistle blowing

Question 13

What is meant by organisation and control by the individual?

Answer 13

Where someone is responsible for their firms organisation, they have taken necessary steps to ensure the structure of the form is appropriate and sufficient of these functions.
Ie is there the right level of delegation

Question 14

What is meant by skill, care, and diligence in management?

Answer 14

In managing others, the individual applied the same standard of skill, care, and diligence in relation to their own conduct.

Question 15

What is meant by compliance for the individual?

Answer 15

Making sure systems are appropriate, proportionate and adequate for purpose.

Question 16

What does a fit a proper test look at?

Answer 16

Honesty, integrity, and reputation - criminal records, past complaints, etc.

Competency and capability - do they have the necessary qualifications
After doing a skill gap analysis, what plans are in place to bring them up to scratch.

Financial soundness - someone in trouble is more likely to come under pressure to cause a bad customer outcome for personal gain.
Do they have any outstanding CCJ or past significant financial problems.

Question 17

What should senior managers develop?

Answer 17

A clear, appropriate, and recorded appointment of responsibilities against which the individual can be monitored and failure of which can be punished.

Question 18

What are the punishments for people who neglect their responsibilities under approved person’s or SM&CR?

Answer 18

Fining
Loss of job
Inability to work in the financial industry

Question 19

How soon does the FCA expect someone to be disaplined and reported if found to do wrong?

Answer 19

As soon as possible

Question 20

What other key area that is not mentioned is important for personal wthical control?

Answer 20

Conflicts of interest.
Firms should look at this in a broad sense, and managers should ensure there is a formal policy for it.

Question 21

What is the most effective way to control conflict of interest?

Answer 21

Idemtify what consitute a conflict and train people to use their own initiative and think outside the box for their role.

Question 22

What does the Certificsyion Regime (CR) require?

Answer 22

Relevant firms to assess the fitness and propriety of certain employees who could pose a significant risk of harm to the firm or any of its customers.

Question 23

What should you remember for the certification regime?

Answer 23

Anyone whose role has a significant bareing to the success or failure of the firm should have individual, regular, reassement of their ‘fit and proper’ credentials with fitness for role now be determined by the firm rather than the regualtor.

Question 24

What must firms do under the certification regime?

Answer 24

Allocate prescribed responsibilities across their Senior Managers setting out their duties. This forms part of the overall firm management and governance map.

Question 25

What must be adhered to under the CR?

Answer 25

Conduct rules. These are broadly the same as the conduct rules of approved persons.

Question 26

What conduct rules under CR are applicable for most people?

Answer 26

Rule 1: You must act with integrity

Rule 2: You must act with due skill, care, and diligence.

Rule 3: You must be open and co-operative with the FCA, the PRA, and other regulators.

Rule 4: You must pay due regard to the interests of customers and treat them fairly.

Rule 5: You must observe proper standards of market conduct.

Question 27

What rules under CR apply to senior management?

Answer 27

SC 1: You must take responsible steps to ensure that the business of the firm you are part of is controlled effectively.

SC2: You must take responsible steps to ensure that the business of the firm you are part of complies with relevant requirements and standards of the regulatory system.

You must take responsible steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

SC 4: You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

Question 28

Where does the responsibility to report regulatory breaches sit?

Answer 28

The firms appointed compliance manager.

Question 29

What is corporate culture?

Answer 29

The way we do things.

Ie
The FCA expects fair treatment of customers
The ‘top tree’ are expected to implement sound structures that support good practice.

Question 30

Why does the FCa look at key cultural drivers?

Answer 30

These have an influence on the behaviour of management and their staff impacting client outcomes as consequences.

Question 31

What are the six key areas of corporate culture?

Answer 31

Leadership
Strategy
Discussion making and challenge
Controls
Recruitment and T&C
Reward

Question 32

Brak down what I’d expected in leadership?

Answer 32

Lead from the front.
Live the values and demonstrate best practice.

Question 33

Give an example of good leadership practice

Answer 33

Creating FTC objectives for staff with senior management providing clear direction.

Pursuing an ex advisor through the courts for tampering with customer documents

Question 34

Give examples of bad practice?

Answer 34

Failing to identify or articulate what FTC means for the business.

Having a significant amount of rhetoric on FTC in the materials but customer facing staff failing to deliver on it.

Question 35

Break down strategy

Answer 35

Set out a clear vision so that everyone is able to see what is expected of them and how the firm expects them to treat customers.

Question 36

Brak down desicion making and challenge.

Answer 36

Have the customer at the centre and strike the necessary balance between the interests of the shareholders and interests of the customers.

Be open to challenge from outside and within.

Question 37

What ways could challenge be made?

Answer 37

Regualtory intervention
Customer feedback
Whistle blowing

Question 38

Break down controls?

Answer 38

The management should have access to all the relevant management information they need to ensure the right things are happening.

This means defining outcomes and putting in a robust MI structure to monitor outcomes.

Question 39

Break down recruitment and T&C

Answer 39

Trust staff to remain and develop them properly.

Question 40

Break down reward

Answer 40

Don’t incentivise wrong behaviour.

Reward good behaviour.

Question 41

What is a way to give time for wrongdoing to come to the surface?

Answer 41

Deffer top people’s pay for several years.