One benefit of the Rules-Based model of regulation is that it:
Evolves quickly in fast-changing dynamic markets
Provides a source of guidance on how firms and individuals are expected to act
Involves a high degree of prescriptive procedures and detailed rules, making it clear what individuals and firms must do to comply
Offers a unique combination of private interests with government oversight
A Rules-Based model provides strict, prescriptive compliance requirements to ensure regulatory adherence.
Why is Option C Correct?
It removes ambiguity by outlining clear-cut rules that financial firms must follow.
Example: The FCA’s Conduct of Business Sourcebook (COBS) provides detailed guidelines on investment advice and suitability.
Why Not Other Options?
A (Evolves quickly) → Rules-based systems are rigid and slow to adapt.
B (Guidance) → A Principles-Based system (not Rules-Based) provides general guidance.
D (Combination of interests) → This relates more to self-regulation models.
???? Reference: FCA Regulatory Framework, CISI Wealth & Investment Management.
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