CISI: UK Financial Regulation/ The Regulatory
Environment Verified Multiple Choice and Conceptual
Actual Emended Exam Questions With Reviewed
100% Correct Detailed Answers
Guaranteed Pass!!Current Update
1. Financial Services and Markets Act (FSMA) - ANSWER The legislation
that established the Financial Services Authority, and empowered it to
regulate the financial services sector. The Act has subsequently been
amended by the Financial Services Act 2012 to create the twin peaks
approach of regulation in the form of the FCA and the PRA
2. What are the two core purposes of the Bank of England? - ANSWER 1.
Monetary Stability - meaning up-keeping confidence in the currency and
keeping prices stable. The latter is defined by the inflation target and is met
through the decisions delegated to the Monetary Policy Committee.
Financial Stability - this entails detecting and reducing threats to the stability of
the financial system as a whole, an area covered by the PRA.
3. Financial Policy Committee - ANSWER An official committee of the BoE
that possesses powers of direction and recommendation in relation to
financial stability. The committee meets at least four times a year and is
responsible for the Bank's bi-annual Financial Stability Report.
They identify, monitor, remove and reduce systemic risk.
,4. Her Majesty's Treasury - ANSWER Has overall responsibility for the UK's
financial system, including the institutional structure and the legislation that
governs it. The Treasury has the power to appoint or dismiss the FCA's
board and chairman, and requires the FCA to report to the Treasury at least
once a year . HMT also has the power to commission reviews and inquiries
into the aspects of the FCA's operations. (appoint/dismiss, reports,
inquiries)
5. Financial Conduct Authority - ANSWER A replacement of the Financial
Services Authority, responsible for protecting consumers, keeping the
industry stable, and promoting healthy competition between financial
services providers.
6. Prudential Regulation Authority - ANSWER An authority part of the BoE
that oversees the prudential regulation of dual-regulated firms, which
includes deposit takers, insurers and significant investment firms.
7. The statutory objectives of the FCA - ANSWER Strategic objective:
Ensure that relevant markets function well
Operational objectives:
Consumer protection objective :"Secure an appropriate degree of protection
for consumers"
Integrity objective: "Protecting and enhancing the integrity of the UK financial
system"
Competition objective: "Promoting effective competition in the interests of
consumers"
,(F-PIC: function, protection, integrity, competition)
8. What is the main role of the FCA? - ANSWER Enforce regulation & laws
which helps mitigate conduct risk
9. What is conduct risk - ANSWER The risk of detriment (damage to
interest financial or non financial) to customers of financial services firms by
poor conduct.
10.What are some examples of conduct risk - ANSWER - Firms being
mismanaged
- Products and services clearly not designed or in the interests of
customers
11.In the FCAs view how is conduct risk primarily driven - ANSWER By poor
culture within firms
Employees within firms (poor managers not properly training staff)
12.What is prudential risk - ANSWER Type of systemic risk - risk caused to
stability of financial services industry as a whole, which could be caused by
insolvency of a firm
13.Who appoints board of directors at the FCA - ANSWER HMT - the chair
of the board is appointed by Chancellor
14.The PRA is part of - ANSWER BOE
, 15.For solo regulated firms - who does the prudential & conduct regulation -
ANSWER The FCA
16.Who issues directions to the FCA & PRA - ANSWER The Financial Policy
Committee (FPC)
17.Who appoints members to the FPC - ANSWER BOE
18.What does the FPC do biannually - ANSWER Issue financial stability
report - sets out FPC view of financial stability of UK financial system
19.What firms need to be PRA regulated - ANSWER - Deposit takers -
banks, building societies
- Insurers- anything to do with authorized insurance activities
(including insurance brokers)
- Significant Investment Firm
20.What is the PRA objective - ANSWER General Objective - to promote the
safety and soundness of PRA authorised firms
- Avoid instability
- Minimize adverse effect the failure of PRA firm would have on the
stability of financial services
Insurance objective- contributing to the securing of protection for those who
are or may be policy holders
Environment Verified Multiple Choice and Conceptual
Actual Emended Exam Questions With Reviewed
100% Correct Detailed Answers
Guaranteed Pass!!Current Update
1. Financial Services and Markets Act (FSMA) - ANSWER The legislation
that established the Financial Services Authority, and empowered it to
regulate the financial services sector. The Act has subsequently been
amended by the Financial Services Act 2012 to create the twin peaks
approach of regulation in the form of the FCA and the PRA
2. What are the two core purposes of the Bank of England? - ANSWER 1.
Monetary Stability - meaning up-keeping confidence in the currency and
keeping prices stable. The latter is defined by the inflation target and is met
through the decisions delegated to the Monetary Policy Committee.
Financial Stability - this entails detecting and reducing threats to the stability of
the financial system as a whole, an area covered by the PRA.
3. Financial Policy Committee - ANSWER An official committee of the BoE
that possesses powers of direction and recommendation in relation to
financial stability. The committee meets at least four times a year and is
responsible for the Bank's bi-annual Financial Stability Report.
They identify, monitor, remove and reduce systemic risk.
,4. Her Majesty's Treasury - ANSWER Has overall responsibility for the UK's
financial system, including the institutional structure and the legislation that
governs it. The Treasury has the power to appoint or dismiss the FCA's
board and chairman, and requires the FCA to report to the Treasury at least
once a year . HMT also has the power to commission reviews and inquiries
into the aspects of the FCA's operations. (appoint/dismiss, reports,
inquiries)
5. Financial Conduct Authority - ANSWER A replacement of the Financial
Services Authority, responsible for protecting consumers, keeping the
industry stable, and promoting healthy competition between financial
services providers.
6. Prudential Regulation Authority - ANSWER An authority part of the BoE
that oversees the prudential regulation of dual-regulated firms, which
includes deposit takers, insurers and significant investment firms.
7. The statutory objectives of the FCA - ANSWER Strategic objective:
Ensure that relevant markets function well
Operational objectives:
Consumer protection objective :"Secure an appropriate degree of protection
for consumers"
Integrity objective: "Protecting and enhancing the integrity of the UK financial
system"
Competition objective: "Promoting effective competition in the interests of
consumers"
,(F-PIC: function, protection, integrity, competition)
8. What is the main role of the FCA? - ANSWER Enforce regulation & laws
which helps mitigate conduct risk
9. What is conduct risk - ANSWER The risk of detriment (damage to
interest financial or non financial) to customers of financial services firms by
poor conduct.
10.What are some examples of conduct risk - ANSWER - Firms being
mismanaged
- Products and services clearly not designed or in the interests of
customers
11.In the FCAs view how is conduct risk primarily driven - ANSWER By poor
culture within firms
Employees within firms (poor managers not properly training staff)
12.What is prudential risk - ANSWER Type of systemic risk - risk caused to
stability of financial services industry as a whole, which could be caused by
insolvency of a firm
13.Who appoints board of directors at the FCA - ANSWER HMT - the chair
of the board is appointed by Chancellor
14.The PRA is part of - ANSWER BOE
, 15.For solo regulated firms - who does the prudential & conduct regulation -
ANSWER The FCA
16.Who issues directions to the FCA & PRA - ANSWER The Financial Policy
Committee (FPC)
17.Who appoints members to the FPC - ANSWER BOE
18.What does the FPC do biannually - ANSWER Issue financial stability
report - sets out FPC view of financial stability of UK financial system
19.What firms need to be PRA regulated - ANSWER - Deposit takers -
banks, building societies
- Insurers- anything to do with authorized insurance activities
(including insurance brokers)
- Significant Investment Firm
20.What is the PRA objective - ANSWER General Objective - to promote the
safety and soundness of PRA authorised firms
- Avoid instability
- Minimize adverse effect the failure of PRA firm would have on the
stability of financial services
Insurance objective- contributing to the securing of protection for those who
are or may be policy holders
