The architecture of UK regulation: the law it rests on, the bodies it created, and which activities fall inside the perimeter. Expect questions that test whether an activity is regulated at all, and which regulator owns it.
What how regulation works covers in the R01 exam
- The Financial Services and Markets Act 2000 (FSMA) and the 2012/2023 reforms
- The 'twin peaks' model: the FCA for conduct, the PRA for prudential soundness
- The regulated activities and the perimeter — what needs authorisation
- Approved persons, the Senior Managers & Certification Regime (SM&CR)
- The Financial Policy Committee and systemic risk
- How EU-derived rules were retained and are being reformed
Where candidates lose marks
Assuming every financial activity is regulated — the perimeter is narrower than candidates expect.
Giving the PRA a conduct role, or the FCA a prudential role for the largest firms.
Treating 'authorised' and 'approved' as the same thing — firms are authorised, individuals are approved.
Worked example questions
Real R01-style questions from our bank, with the correct answer and the reasoning. No sign-in needed.
Which FCA objective is most closely linked to promoting confidence in UK financial markets?
- ASafety and soundness
- BInflation targeting
- CCompetition enforcement
- DMarket integrityCorrect
- EOperational resilience
Why: The FCA’s statutory objective of market integrity ensures that UK markets are fair, effective, and trusted, thereby underpinning investor confidence.
In what way does the FCA coordinate with the PRA when supervising dual-regulated firms?
- AMemorandum of Understanding defining responsibilitiesCorrect
- BConducting combined inspections for every firm
- CApproving each other’s enforcement fines
- DJointly setting the base rate
- ESharing responsibility for systemic liquidity injections
Why: The FCA and PRA operate under a Memorandum of Understanding that sets out coordination arrangements for dual-regulated firms, ensuring clarity of responsibilities and reducing duplication.
What is the PRA’s secondary competition objective?
- AEnsure firms maximise shareholder returns
- BSet competitive benchmarks for LIBOR alternatives
- CFacilitate effective competition in the interests of consumersCorrect
- DOversee fair trading in securities markets
- EPromote competitive exchange listing fees
Why: The PRA’s secondary competition objective requires it to act, when possible, in ways that facilitate effective competition in the interests of consumers.
Free, exam-style R01 questions across the syllabus, with an explanation for every answer and a per-topic breakdown at the end. The full 100-question mocks come with Pro.
Start free practiceHow regulation works — questions answered
What is the difference between the FCA and the PRA?
The FCA is the conduct regulator for all financial-services firms. The PRA, part of the Bank of England, is the prudential regulator for the largest, systemically important firms — banks, building societies, insurers and major investment firms. Those firms are 'dual-regulated' by both.
What is FSMA 2000?
The Financial Services and Markets Act 2000 is the primary legislation behind UK financial regulation. It created the regulatory framework and the 'regulated activities' that require authorisation, and it was later reformed by the Financial Services Acts of 2012 and 2023.
The other R01 syllabus areas
Independent study material, not affiliated with or endorsed by the Chartered Insurance Institute. Always check the official CII website for the current R01 syllabus, format and fees. The CII sets a nominal pass mark of 65% and adjusts it per sitting.