FRE1 LO5: The FCA and PRA - objectives, enforcement, the Handbook and SM&CR

Learning outcome 5 is the largest part of FRE1. AC5.1 covers what the FCA and PRA are trying to achieve and the powers they use. AC5.2 covers the FCA Handbook: its structure, the high-level standards, training and competence, prudential standards, conduct of business, client assets, the Senior Managers and Certification Regime, regulatory processes and authorisation. Learn the exact wording of the objectives and principles: CeMAP® questions often turn on one word.

Statutory objectives

The FCA (FSMA s.1B)

Objective	Wording
Strategic	Ensuring that the relevant markets function well
Operational: consumer protection (s.1C)	Securing an appropriate degree of protection for consumers
Operational: integrity (s.1D)	Protecting and enhancing the integrity of the UK financial system
Operational: competition (s.1E)	Promoting effective competition in the interests of consumers
Secondary (s.1B(4A))	Facilitating the international competitiveness of the UK economy and its growth in the medium to long term (in force 29 August 2023)

When discharging its general functions, the FCA must act compatibly with its strategic objective and advance at least one operational objective. It also has a competition duty: so far as compatible with consumer protection or integrity, it must promote effective competition in consumers' interests (s.1B(4)).

The PRA (FSMA ss.2B to 2H)

Objective	Wording
General	Promoting the safety and soundness of PRA-authorised persons (s.2B)
Insurance	Contributing to an appropriate degree of protection for policyholders (s.2C)
Secondary	Facilitating effective competition; and international competitiveness and growth (s.2H)

Safety and soundness is advanced mainly by making sure firms' business avoids harming the stability of the UK financial system, and by minimising the damage if a firm fails.

Regulatory principles (FSMA s.3B)

Both regulators must have regard to principles including: using resources efficiently and economically; proportionality of burdens to benefits; sustainable growth; the net zero and environmental targets; that consumers should take responsibility for their decisions; the responsibilities of senior management; recognising differences between businesses; publishing information; and acting as transparently as possible.