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CII I11 study materials
CII I11 study resources

CII I11: The regulatory framework and the FCA/PRA

CII I11 · Work through your exam, one topic at a time.

All guide sections

The regulatory framework and the FCA/PRA

The regulatory framework and the FCA/PRA tests the statutory architecture of UK financial regulation and how insurers and intermediaries are authorised and supervised. The exam expects the twin-peaks model and the main statutory objectives.

Statutory framework

  • The Financial Services and Markets Act 2000 creates the regulator's powers, the authorisation requirement and the enforcement toolkit.
  • The PRA is responsible for prudential regulation of banks, insurers and major investment firms; the FCA regulates conduct and prudential standards for other firms.
  • The PRA's objectives include general safety and soundness and, for insurers, policyholder protection. The FCA's strategic objective is to ensure relevant markets function well, supported by consumer protection, integrity and competition objectives.

Authorisation and supervision

  • A firm must be authorised or exempt to carry on regulated activities by way of business in the UK.
  • Threshold conditions cover legal status, location of offices, effective supervision, suitability and financial resources.
  • The Senior Managers and Certification Regime allocates prescribed responsibilities and requires fitness and propriety.
  • Regulators use supervision, information requirements, skilled person reports, fines, prohibitions and public censure.

Worked example

An intermediary introduces insurance policies without authorisation. The FCA investigates. The firm cannot rely on being appointed by an authorised insurer because arranging and advising on contracts of insurance are regulated activities. The FCA may issue a warning, impose a financial penalty, prohibit individuals and require remediation to customers. The PRA is not the conduct regulator here, although prudential issues may arise if the firm is part of a regulated group.

Traps that cost marks

  • Treating the FCA and PRA as having identical objectives.
  • Assuming appointed representative status removes all regulatory responsibility.
  • Confusing authorisation with approval of individual senior managers.
  • Forgetting that regulated activities are defined by the RAO and FSMA.