Financial Conduct Authority (FCA) UK Regulation Sample Exam

What is the primary purpose of the FCA's supervision arrangements?

1. To increase the profitability of financial firms

2. To mitigate and manage risks to the achievement of the statutory objectives

3. To ensure all firms comply with the same internal policies

4. To provide funding for consumer compensation schemes

The correct answer is: To mitigate and manage risks to the achievement of the statutory objectives

The primary purpose of the FCA's supervision arrangements is to mitigate and manage risks to the achievement of its statutory objectives. This is crucial because the FCA is responsible for overseeing financial markets and services to ensure they function well for consumers, maintain market integrity, and promote competition. By focusing on risk mitigation and management, the FCA can proactively identify potential issues before they escalate, ensuring that financial firms operate in a safe and sound manner. This approach allows the FCA to maintain a stable financial system, protect consumers from harm, and ensure that firms are acting in accordance with the law and regulatory requirements. It also enables the FCA to be more adaptable and responsive to emerging risks, which is essential in the ever-evolving financial landscape. In contrast, increasing the profitability of financial firms is not a regulatory objective; the FCA prioritizes consumer protection and market integrity over the profit motives of individual firms. Similarly, while ensuring compliance with internal policies is important, the FCA's focus is broader, encompassing regulatory compliance and risk management rather than just adherence to individual firms' internal rules. Lastly, while consumer compensation schemes are essential for protecting consumers, they are a response to issues that arise, rather than a primary supervisory objective. The main aim remains centered on risk management to uphold the overall health