How are Financial Services Regulated?

How are Financial Services Regulated?

Since 1 April 2013 regulation has been separated between Prudential and Conduct Regulation:

Prudential Regulation 

  • Standards are imposed on firms to control risks
  • It involves policy making to guard against a range of possible outcomes and covers the application of the policies through effective supervision - the Prudential Regulation Authority is responsible for this.

The Prudential Regulation Authority (PRA) has three statutory objectives:

  1. A general objective to promote the safety and soundness of the firms it regulates.
  2. An objective specific to insurance firms, to contribute to the securing of an appropriate degree of protection for those who are or may become insurance policyholders
  3. A secondary objective to facilitate effective competition.

Conduct Regulation

  • To ensure the financial markets work well so that customers get a fair deal - the Financial Conduct Authority is responsible for this.

The Financial Conduct Authority )FCA) has three statutory objectives:

1. To protect consumers
2. To enhance the integrity of the UK financial system
3. To help maintain competitive markets.

There are four main area of work for the FCA and the PRA: 

1. REGULATING - Authorise and supervise conduct of firms and regulate prudential standards
2. PROTECTING - Against fraud and money laundering
3. CHAMPIONING - Standards and training for advisers
4. ENFORCING -The correct behavior and pursuing criminal prosecutions