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LM1 DB > Chapter 6 - Legal and regulatory environment > Flashcards

Chapter 6 - Legal and regulatory environment Flashcards

1
Q

What are the three regulatory bodies in the UK?

A

FCA, PRA and FPC

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2
Q

What is the FCA?

A

Financial Conduct Authority

Regulator responsible for conduct of business and market issues

Consumer protection

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3
Q

What is the PRA?

A

Prudential Regulation Authority

Sits within the Bank of England

Stability and resolvability of important financial institutions e.g., banks, building society etc

Firms can fail without bringing down the whole system

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4
Q

What is the FPC?

A

Financial Policy Committee

Within the Bank of England

Scanning for emerging risks to the system

Strategic planning for direction

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5
Q

What is the PRA’s primary objective?

A

Promote safety and soundness of PRA regulated persons

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6
Q

What is the PRA’s secondary objective?

A

Control behaviours that can impact the stability of the UK financial system

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7
Q

Do all firms have to carry out regulated activities?

A

No, threshold conditions must be met before it is permitted to carry out regulated activities

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8
Q

What PRA risk assessment framework determines a firms level of supervision?

A

Proximity of failure
Proactive Intervention Framework (PIF)
5 stages

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9
Q

What are the FCA objectives?

A

Relevant markets function well
Consumer protection
Integrity of finance system
Competition

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10
Q

What regulatory body covers product governance, end-to-end sales processes and prevention of financial crime?

A

FCA

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11
Q

Does the FCA work with the PRA to approve roles that have impact?

A

Yes

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12
Q

What does the FCA think about new products?

A

Innovate new products but not against the customers needs

Treating customers fairly

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13
Q

What are FCA fixed portfolio firms?

A

Small population firms
Highest level of supervision
Allocated supervisor

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14
Q

What are FCA flexible portfolio firms?

A

FCA customer contact centre at first point of contact
No allocated supervisor

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15
Q

What is the FCAs three pillar approach to risk?

A
  1. Firm systematic framework - are interest of customers at the heart of the way the business is run?
  2. Event driven work - supervisory activity to issues that are emerging or recently happened
  3. Issues and products - Flexible approach, review of issues as they take place
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16
Q

What does the FCA do if it finds problems?

A

Bans products
Withdraws misleading financial promotions
Firing/prosecuting individuals and organisations

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17
Q

Who does the FCA report to?

A

Government and Parliament

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18
Q

How often does the FCA report to Government and Parliament?

A

Annually

19
Q

What takes prejudice between the PRA and FCA when co-ordinating activites?

A

PRA

20
Q

What is customer duty for the FCA?

A

Aimed at manufacturers, supply of products, retail customers (SMEs)
Pricing of products - new vs renewal price

21
Q

What is SYSC?

A

Senior Management Arrangements, Systems and Controls

22
Q

What is a MLRO?

A

Money Laundering Officer

Responsible for anti-ML

23
Q

Who appoints a MLRO?

A

SYSC at a firm

24
Q

What term is used when making a qualified disclosure within a firm?

A

Whistleblowing

25
Q

What act does whistleblowing fall under?

A

Public Interest Disclosure Act 1998 (PIDA)

26
Q

What does PIDA cover?

A

Penalties for making false/malicious allegations
Protected once blown the whistle

27
Q

What is ESG?

A

Environmental, social and governance

Lloyd’s have 4 main areas:
Strategy and governance
Climate
Culture
Communities

28
Q

What regulations does the EU have?

A

Home state financial regulation

Establishment basis - open office in another EU state

Service basis - work from home state

29
Q

What regulations does the USA have?

A

Individual state manages

Admitted bases - foreign companies can work with local companies

Surplus lines broker - removes the need for filing premium and wordings. Needs to be presented to the local market first

Reinsurance is ok with no limitations

30
Q

Lloyd’s in the USA was an admitted insurer for what states?

A

Kentucky
Illinois
US Virgin Islands

31
Q

What is the corporation of Lloyd’s?

A

Everyday management

32
Q

What are the rules in Lloyd’s?

A

Primary rules - byelaws and regulations

Secondary rules - Requirements

33
Q

What are the supporting docs for the rules of Lloyd’s?

A

Explanatory notes and code of practice

34
Q

What happens if you break the rules in Lloyd’s?

A

Enforcement jurisdiction for companies and staff

35
Q

How are new insurers entered into the market?

A

Authorised by the PRA after completing forms

If want to be Lloyd’s then submit to Lloyd’s relationship management team - evidence of solvency and capital adequacy

36
Q

What is the FOS?

A

Financial Ombudsman Service

individuals and small buisnesses
Resolutions from eligiable complaints
8 weeks to respond before referring the matter to the FOS
6 months from the date of decision to report to the FOS

37
Q

What makes you exempt from the FOS?

A

> £6.5m turnover
50 employees

38
Q

What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2022 by firms that occurred after 1st April 2019?

A

£375,000

39
Q

What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2019 and referred between 1st April 2020 and 31st March 2022?

A

£355,000

40
Q

What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2019 and referred between 1st April 2019 and 31st March 2020?

A

£350,000

41
Q

What is the maximum award the FOS can require a firm to make to a complaint made on or after 1st April 2022 about acts or omissions by firms before 1st April 2019 but referred after that date?

A

£170,000

42
Q

What is the FSCS?

A

Financial Services Compensation Scheme

Covers claims against firms that cannot pay (insolvent)

43
Q

Does the FSCS fall under the FCA?

A

Yes

44
Q

Does a Lloyd’s claim ever go unpaid?

A

No - have a central fund

LM1 DB (7 decks)

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