What is the primary objective of structural regulation of financial services firms?

• A. Minimise risks to the financial system.
• B. Ensure financial services providers remain solvent at all times.
• C. Ensure only those with sufficient financial standing and integrity can become financial services firms.
• D. Enforce compliance by financial services providers with consumer law.

Answer: (C)

Structural regulation is about who is allowed to operate in financial services and under what standards. Its main aim is to ensure only firms with sufficient financial standing and integrity can become financial services firms, achieved through licensing, fit-and-proper checks, and minimum capital and governance requirements. By screening entrants, it reduces the risk of poorly run or under-capitalised firms entering the market, which protects consumers and helps maintain market trust.

The other ideas describe aspects of regulation that come later in the process: preventing systemic risk through ongoing prudential controls, ensuring firms remain solvent at all times, or enforcing consumer-law compliance through conduct rules. Those are important, but the gatekeeping role—ensuring entrants meet basic financial and ethical standards before they can operate—is what structural regulation primarily targets.