160 Questions
What is the primary advantage of seeking advice from an Independent Financial Advisor (IFA)?
They have access to a wider range of products on the market.
What is the primary limitation of seeking advice from an Appointed Representative?
They are limited to providing advice on products from a specific provider.
What is the primary role of governments in the financial services industry today?
To protect consumers and combat financial crime.
What is the primary difference between an Independent Financial Advisor and an Appointed Representative?
The range of products they can provide advice on.
What is the historical role of governments in the financial services industry?
To control interest rates and trading in the money markets.
What is the primary benefit of seeking advice from a financial advisor?
They have knowledge of the investments available, providing better insight into the best choices.
What is the primary characteristic of an Independent Financial Advisor?
They are permitted to give advice on any product on the market.
What has been the trend in the UK industry's contribution to the Gross Domestic Product since the 1970s?
It has been slipping
What is the primary limitation of the role of governments in the financial services industry today?
They are limited to consumer protection and education, and combating financial crime.
What do critics of the light touch approach recommend?
A move away from central control through legislation and regulation
What is the role of the UK Government in the financial services industry?
It has a direct impact through legislation and regulation
What is the name of the Act that empowered the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) to be regulators for the UK financial markets?
Financial Services and Markets Act 2000
What is the name of the Act that amended the Financial Services and Markets Act 2000?
Financial Services Act 2012
What does the UK Government's leadership role involve in promoting industry?
Creating a long-term strategy to promote industry
What is a characteristic of the light touch approach?
A move away from central control through legislation and regulation
What is the role of the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) in the UK financial markets?
They are regulators for the UK financial markets
What is a primary focus of social policy in terms of administration?
Policies for health, housing, income maintenance, education, and social work
How is a significant portion of social services funded in the UK?
Through taxation and national insurance contributions
What is the primary goal of the European Union, according to the Treaty on European Union?
To promote economic and social progress
What was the outcome of the UK referendum held on 23 June 2016?
The majority chose to leave the EU
When did the UK officially leave the EU?
31 January 2020
What was the duration of the transitional period after the UK left the EU?
11 months
What is the name of the act passed by the UK Government in 2018, as amended by the European Union (Withdrawal Agreement) Act 2020?
The European Union (Withdrawal) Act
What was the status of the UK during the transitional period after leaving the EU?
It was part of the single market and customs union
What is the primary focus of the Financial Policy Committee (FPC)?
Macro-prudential regulation
Which regulator is responsible for delivering better levels of protection to consumers?
Financial Conduct Authority (FCA)
What is the primary funding mechanism for the Financial Conduct Authority (FCA)?
Levies upon regulated firms
What is the primary difference between the FCA and the old FSA?
The FCA is a more proactive force than the FSA
Which regulator is responsible for setting and enforcing clear expectations for firms and market participants?
Financial Conduct Authority (FCA)
What is the primary goal of the new regulatory framework established by the FSA 2012?
To promote financial stability
In what year did the Prudential Regulation Authority (PRA) become a subsidiary of the Bank of England?
2016
What is the primary focus of the Prudential Regulation Authority (PRA)?
Micro-prudential regulation
What is one of the powers of the PSR?
To set standards and impose rules
What is the primary focus of the Financial Policy Committee (FPC)?
Macro-prudential regulation
Who chairs the Financial Policy Committee (FPC)?
The Governor of the Bank of England
What is a power of the FPC in relation to institutions responsible for oversight and policy?
To give directions, make recommendations, and offer advice
How many non-Bank members are part of the FPC?
Four
What is the purpose of the FPC's power to intervene?
To ensure stability and take appropriate action
Who is a non-voting member of the FPC?
A representative of the Treasury
What is the relationship between the PSR and the Competition & Markets Authority?
They are partners in regulating payment systems
What is the primary reason for the retail market being heavily regulated?
Because clients have less knowledge and experience
What is the primary role of investment banks?
To undertake a range of security related activities on behalf of their clients
What is the primary difference between retail banks and building societies?
Their legal structure
What is the primary function of market making by investment banks?
To quote prices to other market participants
What is the primary role of retail banks?
To provide a high street presence primarily for accepting deposits and giving loans
What is the primary characteristic of building societies?
They are established as mutual societies
What is the primary role of corporate finance in investment banks?
To advise and execute related to the raising of capital by companies
What is the primary reason for the distinction between the retail and wholesale markets?
The level of expertise of market participants
What is the primary role of the FCA when considering an application for authorisation by a dual-regulated firm?
To consider the conduct of the firm
What is the aim of the Payment Systems Regulator (PSR)?
To ensure payment systems are operated and developed in a way that considers and promotes the interests of all users
What is the role of the PRA in considering an application for authorisation by a dual-regulated firm?
To consult with the FCA on the firm's prudential supervision
What is the process used by the PRA when the FCA does not give consent to an application for authorisation?
The PRA considers the response of the FCA but need not be bound by it
What is a statutory objective of the PSR?
To promote effective competition in the markets for payment systems and services
What do dual-regulated firms have to meet?
Both sets of threshold conditions of the PRA and FCA
What is the relationship between the PSR and the FCA?
The PSR is a subsidiary of the FCA
What is the focus of the PRA when considering the application for authorisation by a dual-regulated firm?
Prudential supervision of the firm
What is a consequence of the UK's industry slipping in its contribution to the Gross Domestic Product since the 1970s?
Reduced government leadership in promoting industry
What is the primary role of the His Majesty's Treasury (HMT) in the financial services industry?
Regulating the industry through legislation and policy
What is a key feature of the Financial Services and Markets Act 2000 (FSMA 2000)?
It empowers the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA)
What is a consequence of the light touch approach to industry regulation?
A decrease in the UK's industry contribution to the Gross Domestic Product
What is a key characteristic of the UK Government's approach to promoting industry?
Strong government leadership with a focus on entrepreneurship
What is the role of the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) in the UK financial markets?
To regulate the financial services industry
What is the consequence of the UK Government's approach to industry regulation?
A decrease in the UK's industry contribution to the Gross Domestic Product
What is a limitation of consent under the GDPR?
It is only valid for limited purposes.
What is a key feature of the Financial Services Act 2012?
It amended the Financial Services and Markets Act 2000
What is an enhanced right of data subjects under the GDPR?
The right to be forgotten.
What is a notification requirement under the GDPR in the UK?
Notify the ICO within 72 hours of a breach.
What is the strategic objective of the FCA?
To ensure relevant markets work well.
What are the three operational objectives of the FCA?
Securing an appropriate degree of protection for consumers, protecting and enhancing the integrity of the UK financial system, and promoting effective competition in the interests of consumers.
What is a focus of the FCA's conduct regulation?
The dealings of firms with retail customers.
What does the FCA do in addition to its stated objectives?
Focuses on the conduct regulation of all firms.
What is the scope of the FCA's regulation?
All firms, covering their dealings with retail customers.
What is the primary criterion for the FCA to make rules and provisions?
If they are deemed to be necessary or expedient to protect users of services
How many blocks does the FCA Handbook have?
7 blocks
What is the primary focus of Block 1 in the FCA Handbook?
High-level standards
Which block in the FCA Handbook deals with the conduct of business rules?
Block 3
What is the primary focus of Block 4 in the FCA Handbook?
Regulatory processes
Which sourcebook in the FCA Handbook deals with the fit and proper criteria for approved persons?
FIT
What is the primary focus of Block 5 in the FCA Handbook?
Redress
Which sourcebook in the FCA Handbook deals with the code of conduct for staff?
COCON
What is the primary purpose of financial markets?
To facilitate the raising and trading of capital
What is the result of sophisticated deal-making procedures in financial markets?
The development of complex financial instruments
What is an example of conscious saving?
Depositing cash in a bank account
What is the role of fund managers in financial markets?
To create a portfolio of financial assets on behalf of clients
What is the primary function of financial markets?
To match lenders with borrowers
What is the result of the development of complex financial instruments?
An increase in the number of financial transactions
What is the primary characteristic of unconscious saving?
Paying premiums into a pension company
What is the role of the City of London in the context of financial markets?
A center for financial markets and trading
What is the primary goal of economic and industrial policies in the UK?
To establish low unemployment and low interest rates
Who is responsible for setting and implementing economic policy in the UK?
Both the UK Government and the Bank of England
What is the primary target of the UK Government's economic policy?
Inflation rate of 2.0%
What is the role of the Bank of England's monetary policy in the UK's economic policy?
Setting the base rate of interest
What is the primary focus of the UK's industrial policy?
International competitiveness
What is the relationship between the UK Government's fiscal policy and the Bank of England's monetary policy?
They work together to achieve economic stability
What is the primary goal of the UK Government's economic policy in recent times?
To promote economic recovery
What is the role of the balance of payments in the UK's economic policy?
Playing a role in the UK's economic stability
In which scenario would an investor be more likely to receive a wider range of pension options?
When dealing with an IFA who has knowledge of multiple providers
What is a key difference between the historical and modern role of governments in the financial services industry?
Historically, governments controlled interest rates, while today they focus on consumer protection
What is a key benefit of seeking advice from an IFA or appointed representative?
They can provide insight into the best choices available
What is a primary function of governments in the financial services industry today?
Regulating financial crime and protecting consumers
What is a key difference between an IFA and an appointed representative?
An appointed representative can advise on products from multiple providers
What is the primary focus of governments in the financial services industry, historically?
Controlling interest rates and trading in the money markets
What is a benefit of seeking advice from a financial advisor, whether an IFA or appointed representative?
They can provide insight into the best choices available
What is the primary role of governments in the financial services industry, in relation to financial crime?
To combat financial crime
What is the purpose of 'onshoring' in the context of the EUWA?
To amend retained EU law to ensure its effective operation in the UK
What is the status of the UK in the eyes of the EU after 31 December 2020?
A third country
What allows EEA-based financial services firms to continue operating in the UK after the transition period?
The Temporary Permissions Regime (TPR)
What is the purpose of the powers given to the FCA, PRA, BoE, and PSR?
To amend EU technical standards adopted in the UK and their own rules to reflect the UK's status after leaving the EU
What is the current status of EU-derived legislation in the UK?
Legally binding with no modifications
What is the primary goal of the European Commission in implementing EU legislation?
To harmonize legislation among EU member states
What is the effect of the UK's withdrawal from the EU single market and customs union?
Uncertainty about the future regulatory framework for financial services in the UK
What is the term used to describe the adoption of EU legislation as part of UK law?
Retained EU law
What is the role of the Committee of 'Wise Men' in the EU legislative process?
To recommend EU legislative reforms
What is the primary benefit of the Lamfalussy approach?
Speeds up the EU legislative process
What is the primary objective of the EUWA?
To implement the withdrawal agreement negotiated between the UK and EU
What is the purpose of the amendments made to retained EU law?
To ensure that retained EU law operates effectively in the UK and to remedy any deficiency in such law
What is the relationship between the European Commission and the European Council?
The European Commission is responsible for implementing European Council policies
What is the primary role of the European Commission in EU legislation?
To implement EU legislation
What is the primary focus of the European Commission in performing its role?
To create harmonization in legislation
What is the outcome of the Lamfalussy approach on EU legislation?
Divides EU legislation into high-level framework provisions and implementing measures
What is the primary reason for the crew and the City trader having similar jobs despite the vast time difference?
They both use other people's money to finance trade
What is the primary goal of the crew and the City trader?
To maximize the return on investment for the merchants and the bank
What do the crew and the City trader rely on to complete their jobs?
Other people's money to finance trade
What is the primary difference between the crew and the City trader?
The time period they work in
What is the primary motivation for the crew and the City trader?
To earn a bonus
What is the primary similarity between the crew and the City trader?
Their use of other people's money to finance trade
What do the merchants and the bank expect from the crew and the City trader?
A successful trade
What is the outcome of a successful trade for the crew and the City trader?
A bonus payment
What is the primary objective of the FCA's consumer protection operational objective?
Ensuring an appropriate degree of protection for consumers
How does the UK Government influence the financial services industry through taxation?
Through corporate tax, personal taxation, and other taxes such as stamp duty and VAT
What is the primary focus of social policy in the context of the financial services industry?
Considering social services and the welfare state
What is the name of the Act that set the FCA's four objectives?
FSA 2012
What is the FCA's strategic objective?
Ensuring the relevant markets work well
What is the primary purpose of the FCA's integrity operational objective?
To protect and enhance the integrity of the UK financial system
What is the primary impact of taxation on the financial services industry?
It influences the industry's behavior
What is the primary focus of the FCA's competition operational objective?
To promote effective competition in the interests of consumers
What is the primary purpose of the Value for Money Assessment for authorised fund managers?
To identify the most cost-effective investment options
What is the primary role of the Pensions Regulator in the UK?
To regulate the investment activities of pension funds
What is the primary purpose of the Pension Protection Fund (PPF)?
To provide a safety net for pension scheme members in the event of employer insolvency
What is the primary difference between an occupational pension scheme and a stakeholder pension?
The level of employer involvement
What is the primary purpose of the statement of investment principles?
To outline the investment strategy of a pension fund
What is the primary role of the Alternative Investment Fund Managers' Directive (AIFMD)?
To establish a common framework for the regulation of alternative investment funds
What is the primary purpose of the Undertakings for Collective Investment in Transferable Securities (UCITS)?
To establish a common standard for the operation of collective investment schemes
What is the primary objective of the Fund Regulations in the UK?
To regulate the operation of collective investment schemes
What is the primary objective of the Prudential Regulation Authority (PRA)?
To ensure the safety and financial soundness of firms it regulates
What is the approach taken by the PRA in its regulatory role?
A risk-based and judgement-based approach
How many firms are regulated by the PRA?
Approximately 2,200 firms
What is the relationship between the FCA and the PRA in terms of authorisation functions?
The FCA and PRA have separate authorisation functions but a single administrative process for dual-regulated firms
What is the primary criticism of the 'light-touch' regulatory regime?
It is too lenient
What is the PRA's approach to challenging the management of firms?
It takes a liaison approach with both the FCA and international regulators
What is the primary role of the PRA in terms of its regulated firms?
To ensure the safety and financial soundness of firms
What is the relationship between the PRA and the Bank of England?
The PRA is a subsidiary of the Bank of England
What is the primary role of the Payment Systems Regulator (PSR)?
To set standards and impose rules on payment systems
What is the primary focus of the Financial Policy Committee (FPC)?
To maintain macro-prudential regulation
Who chairs the Financial Policy Committee (FPC)?
The Governor of the Bank of England
What is a power of the FPC in relation to institutions responsible for oversight and policy?
To give directions, make recommendations and offer advice
What is one of the powers of the PSR?
To set standards and impose rules on payment systems
How many non-Bank members are part of the FPC?
Four
What is the purpose of the FPC's power to intervene?
To ensure stability and resilience of the financial system
What is the relationship between the PSR and the Competition & Markets Authority?
They work together to rectify anti-competitive behaviour
Study Notes
Financial Services and Markets
- Social services policies include health, housing, income maintenance, education, and social work
- The UK government funds and controls the delivery of welfare through taxation and national insurance contributions
The European Union and Brexit
- The European Union (EU) was established by the Treaty on European Union (Maastricht, 1992)
- The EU's objectives include promoting economic and social progress, sustainable development, and an area without internal frontiers
- The UK held a referendum in 2016 and chose to leave the EU (Brexit)
- The UK left the EU on January 31, 2020, and entered an 11-month transitional period
Financial Regulation
- The Financial Services Authority (FSA) was disbanded and replaced by:
- The Financial Conduct Authority (FCA)
- The Prudential Regulation Authority (PRA)
- The Financial Policy Committee (FPC)
- The FCA focuses on conduct regulation, the PRA on prudential supervision, and the FPC on macro-prudential regulation
- The Payment Systems Regulator (PSR) is a subsidiary of the FCA and regulates payment systems
Financial Institutions
- Investment banks undertake security-related activities, including trading, broking, market making, research, corporate finance, and fund management
- Retail banks provide high-street presence for accepting deposits and giving loans, and may also offer pensions, life assurance, and share dealing services
- Building societies are mutual societies that provide similar services to retail banks
The Financial Conduct Authority
- The FCA's strategic objective is to ensure relevant markets work well
- The FCA's operational objectives include protecting consumers, promoting effective competition, and maintaining the integrity of the UK financial system
- The FCA has a handbook with seven main blocks, each dealing with different aspects of regulation
Markets
- Financial markets bring together people seeking to trade with one another
- Markets for capital include lending and borrowing, with lenders and borrowers being matched up
- Complex transactions require sophisticated deal-making procedures and the financial markets continue to develop in order to meet this challenge### The European Union Withdrawal Agreement
- The UK-EU withdrawal agreement was implemented through legislation, adopting EU laws as 'retained EU law' in the UK.
- The process of 'onshoring' involved amending retained EU law to ensure its effectiveness in the UK and remedy any deficiencies.
Post-Transition Period
- The UK left the EU single market and customs union on 31 December 2020, becoming a 'third country' in the eyes of the EU.
- The Temporary Permissions Regime (TPR) was introduced to mitigate regulatory uncertainty, allowing EEA-based financial services firms to continue operating in the UK for a limited period.
The Lamfalussy Approach
- The Lamfalussy approach is a four-level procedure that speeds up the legislative process, dividing legislation into high-level framework provisions and implementing measures.
- It was recommended by the Committee of 'Wise Men', chaired by Baron Alexandre Lamfalussy.
The European Commission
- The European Commission is the driving force behind EU legislation and directives, responsible for implementing, managing, and controlling common policies.
- Its goal is to create harmonization in legislation among member states and prevent policy measures that would benefit one economy at the expense of others.
The Financial Conduct Authority (FCA)
- The FCA has four objectives:
- Ensure the relevant markets work well
- Consumer protection
- Integrity
- Competition
- The FCA's second objective was changed from public awareness to financial stability in 2010.
Taxation
- Taxation affects the financial services industry through corporate tax, personal taxation, and other taxes such as stamp duty and VAT.
- The UK Government has great influence over the industry through its control of the tax system.
Social Welfare
- Social welfare, also known as social policy, considers social services and the welfare state.
The City of London
- The City has evolved from a trading hub in the past to a modern financial center, with traders using technology to make decisions and finance trade.
Financial Regulations
- Various regulations and directives affect the financial services industry, including UCITS, AIFMD, and Value for Money Assessment.
Pension Funds
- Pension funds have features such as stakeholder pensions, occupational pension schemes, and a statement of investment principles.
- The Pensions Regulator and Pension Protection Fund (PPF) play important roles in regulating and protecting pension funds.
The Payment Systems Regulator (PSR)
- The PSR has powers to set standards, impose rules, and carry out investigations, as well as work with the Competition & Markets Authority to address anti-competitive behavior.
The Financial Policy Committee (FPC)
- The FPC is responsible for macro-prudential regulation, ensuring the stability and resilience of the financial system.
- It has the authority to give directions, make recommendations, and offer advice to institutions, and can intervene to ensure stability.
This quiz explains the roles of Independent Financial Advisors (IFAs) and Appointed Representatives in providing investment advice to clients. Learn about their differences and benefits.
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