Regulation, Ethics and Treating Customers Fairly
Core concepts
Financial services in the UK are regulated by the Financial Conduct Authority (FCA) and, for prudential matters, the Prudential Regulation Authority (PRA). Candidates must understand the FCA's statutory objectives (consumer protection, integrity, competition) and the Principles for Businesses, especially Treating Customers Fairly (TCF) and the Consumer Duty (fair value, suitable products, clear communications, and good outcomes).
Learn the senior managers and certification regime, approved persons, and the fit and proper test. Understand know your customer (KYC), anti-money laundering (AML), data protection (UK GDPR), and complaints handling (including the Financial Ombudsman Service and the Financial Services Compensation Scheme). Know the difference between advice and guidance, and the requirement for suitability and disclosure of charges.
Traps
Questions often test whether a firm has breached a principle versus a rule, and whether the issue is a conduct or prudential matter. Watch for conflicts of interest and inducements - firms must not pay or accept inducements that impair fair treatment. Another trap is confusing the FOS (resolves complaints) with the FSCS (pays compensation on firm failure).
Worked rule of thumb
When a scenario describes a customer outcome, ask three questions: Was the product suitable? Was the price fair? Was the communication clear? If any answer is no, it is likely a Consumer Duty/TCF failure, regardless of whether a specific rule was broken.