FCA & PRA Compliance Exam Guide:
Principles, Regulatory Powers, and
Enforcement Procedures
Which ONE of the following BEST describes the FCA's Principle for Businesses of market conduct? - ✔✔A
firm must observe appropriate standards of behavior/conduct.
Which ONE of the following is a strategic objective imposed on the FCA by Financial Services Act 2012? -
✔✔Ensure that relevant markets function well.
Which ONE of the FCA's Principles for Business specifically requires firms to ensure the suitability of
their advice? - ✔✔Customers: relationships of trust.
The relationships of trust principle says: " A firm must take reasonable care to ensure the suitability of
its advice and discretionary decisions for any customer who is entitled to rely upon its judgement."
What body has regulatory responsibility for overseeing occupational pensions? - ✔✔The Pensions
Regulator
For what MINIMUM period must MiFID firm retain each version of the record of the apportionment of
senior management responsibilities? - ✔✔5 years.
Where the symbol 'R' appears in an FCA handbook, this indicates that the text is: - ✔✔A binding rule
with breaches subject to disciplinary action.
R stands for "rules are binding on authorised persons(firms) and, if a firm contravenes a rule, it may be
subject to discipline. The FCA's Principles for Businesses are given the status of rules."
The general application of the conduct of business rules (COBS) is modified according to two factors; the
nature of a firm's activities, and which of the following? - ✔✔Location
,A life office is unhappy with a recent disciplinary decision made by the FCA. To which body is it most
appropriate to submit and appeal? - ✔✔The Upper Tribunal (Tax and Chancery)
How are 'the regulators' (the FCA and the PRA) funded? - ✔✔100% from fees paid by regulated firms.
The FCA is directly accountable to: - ✔✔The treasury (it has overall responsibility for the UK financial
system and the FCA)
Who has the power to appoint or dismiss the FCA's board and chairman? - ✔✔The treasury (they have
power over the FCA)
Protection of consumers is a statutory objective of the: - ✔✔Financial Conduct Authority
(has 1 strategic and 3 operational objectives under the Financial Services Act 2012)
Where a firm launches a new mortgage product solely designed for first time buyers, but mailshots
details to a tranche of retired customers, this is likely to be a direct breach of the FCA's: - ✔✔Fair
treatment of customers consumer outcomes
(FCA has defined 6 consumer outcomes relating to FTOC, one of which requires products and services to
be targeted according to need)
How frequently does the FCA have to report to the Treasury on the way it has discharged its functions? -
✔✔Annually
(annual report is accompanied by a report from the FCA's non-executive directors)
Where a firm is classes as 'non-common platform', the FCA's rules regarding Senior Management
Arrangements, Systems and Controls: - ✔✔Operate as guidance rather than as actual rules
,(firms not subject to either the CRD or MiFID are calls 'non-common platform' firms and, in this case, the
SYSC requirements are in the form of guidance rather than rules)
Under which particular threshold condition do the regulators assess whether a firm is 'fit and proper' to
carry out regulated activities? - ✔✔Suitability
Excluding the chairman, what proportion, if any, of the membership of the Regulatory Decisions
Committee (RDC) are FCA employees? - ✔✔None
(the RDC is a committee of the FCA's board, and is accountable to that board; however, it is independent
to the extent that it is outside the FCA's management structure. Only the Chairman is an FCA employee;
the rest of the members represent the public interest and are either current or retired practitioners with
financial services knowledge and experience, or non-practitioners)
Under which ONE of the function types foes the FCA classify a Money Laundering Reporting Officer
(MLRO)? - ✔✔A required function
(required functions are specific individual functions which are required to be established under the
regulatory system and include MLROs)
At what stage of a disciplinary investigation by the Regulatory Decisions Committee (RDC) does any
decision become binding and operational? - ✔✔On issuing a final notice
(final notices set out the terms of the final action, which the FCA or PRA has decided to take and the
date that it is effect from; warning notices set out the details of the action the FCA or PRO proposes to
take; a decision notice gives details of the action that the FCA or PRA has decided to take but leaves
room for appeal)
To whole can a firm or individual appeal against any decisions of the Regulatory Decisions Committee
(RDC)? - ✔✔The Upper Tribunal
(The Upper Tribunal is where a firm or individual may seek redress from an RDC decisions against them;
the Financial Ombudsman Service (FOS) is where customers might go to make a complaint against a
firm)
, To whom would a firm appeal in connection with disciplinary fines imposed by the FCA? - ✔✔The Upper
Tribunal
(The Upper Tribunal - tax and chauncery - has been established to act as an independent appeals
channel for firms and individuals to challenge disciplinary sanctions imposed by the FCA and PRA)
Chartered accountants and law firms are typical of which type of organizations granted special status by
FSMA? - ✔✔Designated Professional Bodies (DPB)
(firms involved peripherally with investments)
Honest, integrity and reputation are part of what process for approved persons? - ✔✔The fit and proper
test
(covers 3 areas: honest, integrity, and reputation; financial soundness; competence and capability)
Which ONE of the following is a regulated activity requiring authorisation? - ✔✔Establishing a collective
investment scheme
Who has specific responsibility to exercise the FCA's or PRA's powers to impose a financial penalty or
public censure on any person? - ✔✔Regulatory Decisions Committee
(makes disciplinary decisions)
Which one of the actions can the regulators take to seek redress for consumers? - ✔✔Apply to courts
for restitution
(regulators have the power to seek redress for consumers from any person, whether authorized of not,
that has breached a relevant requirement of FSMA; they apply to the court and the court will quantify
and direct to whole restitution should be paid)
Principles, Regulatory Powers, and
Enforcement Procedures
Which ONE of the following BEST describes the FCA's Principle for Businesses of market conduct? - ✔✔A
firm must observe appropriate standards of behavior/conduct.
Which ONE of the following is a strategic objective imposed on the FCA by Financial Services Act 2012? -
✔✔Ensure that relevant markets function well.
Which ONE of the FCA's Principles for Business specifically requires firms to ensure the suitability of
their advice? - ✔✔Customers: relationships of trust.
The relationships of trust principle says: " A firm must take reasonable care to ensure the suitability of
its advice and discretionary decisions for any customer who is entitled to rely upon its judgement."
What body has regulatory responsibility for overseeing occupational pensions? - ✔✔The Pensions
Regulator
For what MINIMUM period must MiFID firm retain each version of the record of the apportionment of
senior management responsibilities? - ✔✔5 years.
Where the symbol 'R' appears in an FCA handbook, this indicates that the text is: - ✔✔A binding rule
with breaches subject to disciplinary action.
R stands for "rules are binding on authorised persons(firms) and, if a firm contravenes a rule, it may be
subject to discipline. The FCA's Principles for Businesses are given the status of rules."
The general application of the conduct of business rules (COBS) is modified according to two factors; the
nature of a firm's activities, and which of the following? - ✔✔Location
,A life office is unhappy with a recent disciplinary decision made by the FCA. To which body is it most
appropriate to submit and appeal? - ✔✔The Upper Tribunal (Tax and Chancery)
How are 'the regulators' (the FCA and the PRA) funded? - ✔✔100% from fees paid by regulated firms.
The FCA is directly accountable to: - ✔✔The treasury (it has overall responsibility for the UK financial
system and the FCA)
Who has the power to appoint or dismiss the FCA's board and chairman? - ✔✔The treasury (they have
power over the FCA)
Protection of consumers is a statutory objective of the: - ✔✔Financial Conduct Authority
(has 1 strategic and 3 operational objectives under the Financial Services Act 2012)
Where a firm launches a new mortgage product solely designed for first time buyers, but mailshots
details to a tranche of retired customers, this is likely to be a direct breach of the FCA's: - ✔✔Fair
treatment of customers consumer outcomes
(FCA has defined 6 consumer outcomes relating to FTOC, one of which requires products and services to
be targeted according to need)
How frequently does the FCA have to report to the Treasury on the way it has discharged its functions? -
✔✔Annually
(annual report is accompanied by a report from the FCA's non-executive directors)
Where a firm is classes as 'non-common platform', the FCA's rules regarding Senior Management
Arrangements, Systems and Controls: - ✔✔Operate as guidance rather than as actual rules
,(firms not subject to either the CRD or MiFID are calls 'non-common platform' firms and, in this case, the
SYSC requirements are in the form of guidance rather than rules)
Under which particular threshold condition do the regulators assess whether a firm is 'fit and proper' to
carry out regulated activities? - ✔✔Suitability
Excluding the chairman, what proportion, if any, of the membership of the Regulatory Decisions
Committee (RDC) are FCA employees? - ✔✔None
(the RDC is a committee of the FCA's board, and is accountable to that board; however, it is independent
to the extent that it is outside the FCA's management structure. Only the Chairman is an FCA employee;
the rest of the members represent the public interest and are either current or retired practitioners with
financial services knowledge and experience, or non-practitioners)
Under which ONE of the function types foes the FCA classify a Money Laundering Reporting Officer
(MLRO)? - ✔✔A required function
(required functions are specific individual functions which are required to be established under the
regulatory system and include MLROs)
At what stage of a disciplinary investigation by the Regulatory Decisions Committee (RDC) does any
decision become binding and operational? - ✔✔On issuing a final notice
(final notices set out the terms of the final action, which the FCA or PRA has decided to take and the
date that it is effect from; warning notices set out the details of the action the FCA or PRO proposes to
take; a decision notice gives details of the action that the FCA or PRA has decided to take but leaves
room for appeal)
To whole can a firm or individual appeal against any decisions of the Regulatory Decisions Committee
(RDC)? - ✔✔The Upper Tribunal
(The Upper Tribunal is where a firm or individual may seek redress from an RDC decisions against them;
the Financial Ombudsman Service (FOS) is where customers might go to make a complaint against a
firm)
, To whom would a firm appeal in connection with disciplinary fines imposed by the FCA? - ✔✔The Upper
Tribunal
(The Upper Tribunal - tax and chauncery - has been established to act as an independent appeals
channel for firms and individuals to challenge disciplinary sanctions imposed by the FCA and PRA)
Chartered accountants and law firms are typical of which type of organizations granted special status by
FSMA? - ✔✔Designated Professional Bodies (DPB)
(firms involved peripherally with investments)
Honest, integrity and reputation are part of what process for approved persons? - ✔✔The fit and proper
test
(covers 3 areas: honest, integrity, and reputation; financial soundness; competence and capability)
Which ONE of the following is a regulated activity requiring authorisation? - ✔✔Establishing a collective
investment scheme
Who has specific responsibility to exercise the FCA's or PRA's powers to impose a financial penalty or
public censure on any person? - ✔✔Regulatory Decisions Committee
(makes disciplinary decisions)
Which one of the actions can the regulators take to seek redress for consumers? - ✔✔Apply to courts
for restitution
(regulators have the power to seek redress for consumers from any person, whether authorized of not,
that has breached a relevant requirement of FSMA; they apply to the court and the court will quantify
and direct to whole restitution should be paid)
