UK Financial Services Regulation and Compliance
This domain tests whether you can place a UK investment firm inside the regulatory architecture and apply the rulebook to a live fact pattern: who authorises the firm, which rules bite, what records must exist, and who is personally accountable.
The architecture
- FSMA 2000 is the governing statute. The FCA regulates conduct and markets; the PRA regulates the prudential soundness of banks and insurers. Dual regulation means one firm may answer to both, for different things.
- The FCA Handbook is modular: PRIN (the 11 Principles for Businesses), COBS (conduct of business), SYSC (systems and controls), CASS (client money and client assets), TC (training and competence), MAR (market conduct).
- SM&CR replaced the Approved Persons Regime for most firms: Senior Managers carry prescribed responsibilities set out in Statements of Responsibilities, while Certification Staff are certified annually as fit and proper.
Worked example
An adviser recommends a high-charge bond fund to a retired client. The file holds a fact find but no suitability report, no charges disclosure, and no evidence that capacity for loss was assessed. Name the breaches. Reasoning: COBS 9 requires a suitability assessment covering objectives, risk tolerance and capacity for loss; COBS 9.4 requires a suitability report on advised sales; missing charges disclosure engages PRIN Principle 7 (communications clear, fair and not misleading) and Principle 6 (pay due regard to customers' interests). SYSC requires the firm's records to evidence all of it - a weak file is a systems and controls failure, not a clerical slip.
Traps that cost marks
- Treating the Principles as binding only individuals. They bind the firm; SM&CR layers individual accountability on top.
- Assuming the PRA writes conduct rules. It does not.
- Citing "TCF" as a free-standing rule instead of linking it to Principle 6 and the fair-treatment outcomes.