1. Financial Services Regulation Flashcards
What does the SEC do?
It monitors securities exchanges, brokers, dealers, investment advisors and mutual funds.
The SEC aims to ensure that market-related information is disclosed to the investment community in a fair and timely manner.
It also enforces laws to prevent investors suffering from unfit trading practices and insider trading.
What is the SEC?
The SEC or Securities and Exchange Commission is the financial services market regulator in the US
What are the ‘Twin Peaks’?
Two new regulatory agencies in the UK:
The Prudential Regulatory Authority (PRA)
And
The Financial Conduct Authority (FCA)
What is the PRA?
The PRA or Prudential Regulatory Authority is a subsidiary of the BoE & is responsible for the prudential supervision of banks, insurance companies, and complex investment firms
What is the FCA?
The FCA or Financial Conduct Authority is responsible for the prudential supervision of firms not supervised by the PRA including brokers, wealth management companies, financial advisors and investment exchanges.
It is also responsible for the conduct of business rules that firms must adhere to.
What is the name of the authority that works towards enforcing a level playing field in all EU regulation.
The European Securities and Markets Authority (ESMA) works on securities legislation in order to contribute to the development of a single rulebook in Europe.
What is the role of ESMA?
Its role involves standard setting in order to ensure that there is consistent investor protection across the EU and it works closely with other European supervisory authorities & the European Systemic Risk Board (ESRB) on potential risks to the financial system.
What is is the IOSCO?
IOSCO was established due to the need for international co-operation between regulatory bodies.
Its members regulate more than 90% of the world’s securities markets and is the world’s most important international co-operative forum for securities regulatory agencies.
What do international regulators use IOSCO structures for?
- Co-operate to promote high standards of regulation
- Exchange information to promote development of markets
- Unite their efforts to establish standards & effective surveillance of international securities transactions
- Provide mutual assistance to promote integrity of markets by a rigorous application of standards & by effective enforcement against offences.
What are the 3 main objectives of securities regulation set out by the IOSCO in 1998?
- The protection of investors
- Ensuring that markets are fair, efficient & transparent
- The reduction of systemic risk
What markets are investors particularly vulnerable in and how is this market controlled?
Securities markets.
The complex character of securities transactions and of fraudulent schemes requires enforcement of securities laws. Where a breach of law does occur, investors should be protected through the strong enforcement of the law. Investors should have access to a natural mechanism (such as the courts or other mechanisms of dispute resolution) or means of redress & compensation for improper behaviour.
How is market transparency defined?
The degree to which information about trading (both pre-trade and post-trade information) is made publicly available on a real-time basis.
What does ‘pre-trade’ information concern?
The posting of firm bids and offers as a means to enable investors to know, to some degree of certainty, whether, and at what prices, they can deal.
What does ‘post-trade’ information concern?
Post-trade information is related to the prices and the volume of all individual transactions actually concluded.
If financial failure occurs, what should regulation seek to do?
It should seek to reduce the impact of that failure and, in particular, attempt to isolate the risk to the failing institution. This happened in the Dodd-Frank Act in the US.
