2.2 Global Regulation

Question 1

What are the two theories of regulation? (Public interest and private interest)

Answer 1

The public interest theory of regulation is the idea that regulation should benefit society and reduce the collateral damage caused by free markets to competition and the environment.

Private interest theories of regulation consider that legislators, businesses, and industry groups may protect self-interests through regulation (e.g., limiting competition, limiting imports).

Question 2

Despite varying regulations in the world, what are three basic and universal principles which go across many places? (t, fm, rol)

Answer 2

transparency, fair markets and the rule of law / use of law by governments to maintain social and economic systems

Question 3

Increased regulation can be viewed as a positive or a negative - examples of each

Answer 3

It is viewed as negative when it restricts the activities of a business.

Can be viewed as positive when it creates new activities that are less regulated. e.g. increase in commercial lending regulations in the U.S. paved the way for the development of the shadow banking system which is less regulated and more efficient

Question 4

What are qualified opportunity zones?

Answer 4

Qualified opportunity zones consist of tax cuts that are offered to investors for private equity and real estate investments in certain areas of the U.S. (or think DIFC). As a result, there was a surge in such investments after the legislative change.

Question 5

What is the name for a zone in the US with tax and regulation cuts?

Answer 5

Qualified opportunity zone

Question 6

What are the four main regulatory bodies in the US?

Answer 6

1. SEC (Securities and Exchange Commission) - main oversight and regulatory authority in the U.S. securities markets
2. FINRA (Financial Industry Regulatory Agency) - managed by the SEC, oversees activities of broker-dealers
3. CFTC (US Commodity Futures Trading Commission) - oversight body for the commodity derivatives market
4. National Futures Association - self-regulating body that oversees individuals and firms involved in trading futures

Question 7

What is the name for state specific financial laws?

Answer 7

Blue sky laws

Question 8

The Securities and Exchange Commission (SEC) has the ______ in the U.S. securities markets. The SEC’s responsibilities consist of SII, PCI, and ensuring the SF of markets. The SEC has PD DR, which means investors must be provided with crucial information about securities prior to investing.

Answer 8

The Securities and Exchange Commission (SEC) has the main oversight and regulatory authority in the U.S. securities markets. The SEC’s responsibilities consist of safeguarding investors’ interests, promoting capital investment, and ensuring the smooth functioning of markets. The SEC has principles-based disclosure requirements, which means investors must be provided with crucial information about securities prior to investing.

Question 9

What does the SEC have which means investors must be provided with crucial information about securities prior to investing

Answer 9

Principles-based disclosure requirements

Question 10

The National Futures Association (NFA) is a ______ body that oversees _______.

Answer 10

The National Futures Association (NFA) is a self-regulating body that oversees individuals and firms involved in trading futures.

Question 11

The _________ (CFTC) is the oversight body for ________ to prevent any participants from suffering harm caused by fraud and other unethical behavior.

Answer 11

The U.S. Commodity Futures Trading Commission (CFTC) is the oversight body for the commodity derivatives market (both individuals and firms) to prevent any participants from suffering harm caused by fraud and other unethical behavior.

Question 12

Name five key regulatory acts and 2 additional:
1. 1933
2. 1934
3. 1940
4. 1940
5. 2010

+2

Answer 12

1. Securities Act of 1933 (Securities Act) - mandates securities (including private funds) registration with the SEC, subject to any relevant exemptions
2. Securities Exchange Act of 1934 (Exchange Act) - oversees the trading activity in the secondary market with regulations for exchanges and broker-dealers
3. Investment Advisers Act of 1940 (Advisers Act) - registering and regulating those who offer investment advice on securities (anyone offering paid investment advice or publishing analyst reports on securities)
4. Investment Company Act of 1940 (1940 Act) - companies that invest and trade in securities and whose own securities are publicly traded, includes mutual funds
5. Dodd-Frank Act 2010 - against predatory practices by financial institutions and disallowing taxpayer-funded bailouts for financial firms

Two others are Commodity Exchange Act for derivatives and the Employee Retirement Income Security Act (ERISA)

Question 13

Dates of the following acts?

1. Securities Act
2. Securities Exchange Act
3. Investment Advisers Act
4. Investment Company Act
5. Dodd-Frank Act

Answer 13

1. Securities Act of 1933
2. Securities Exchange Act of 1934
3. Investment Advisers Act of 1940
4. Investment Company Act of 1940
5. Dodd-Frank Act 2010

Question 14

Which act focuses on overseeing the trading activity in the secondary market with regulations for exchanges and broker-dealers?

Answer 14

Securities Exchange Act of 1934 (Exchange Act)

Question 15

Which act focuses on registering and regulating those who offer investment advice on securities?

Answer 15

Investment Advisers Act of 1940 (Advisers Act)

Question 16

Which act focuses on predatory practices by financial institutions?

Answer 16

Dodd Frank Act 2010

Question 17

Which act covers companies that invest and trade in securities and whose own securities are publicly traded/mutual funds?

Answer 17

Investment Company Act of 1940 (1940 Act)

Question 18

Private fund managers, who are considered investment advisers, are required to register with either the state or the SEC - depends on AUM:

AUM less than $25 million:

AUM of $25 million to $100 million and has a permanent establishment in a state that requires registration:

AUM of $25 million to $100 million and has a permanent establishment in a state that does not require registration:

AUM of $25 million to $100 million and has a permanent establishment in state that does not require examination by the state securities commissioner:

AUM greater than $100 million and has managed accounts:

AUM greater than $150 million and no managed accounts:

Answer 18

AUM less than $25 million: usually no need to register with state or SEC
AUM of $25 million to $100 million and has a permanent establishment in a state that requires registration: registration with state
AUM of $25 million to $100 million and has a permanent establishment in a state that does not require registration: registration with SEC
AUM of $25 million to $100 million and has a permanent establishment in state that does not require examination by the state securities commissioner: registration with SEC
AUM greater than $100 million and has managed accounts: registration with SEC
AUM greater than $150 million and no managed accounts: registration with SEC

Question 19

Who are provided a $10 million discretion to avoid constant changes in state and SEC registration due to AUM changes?

Answer 19

Private fund managers with AUM in the range of $25 million to $100 million

Question 20

Private fund managers with AUM in the range of $25 million to $100 million are provided a _______

Answer 20

They are provided a $10 million discretion to avoid constant changes in state and SEC registration due to AUM changes.

Question 21

When would a non-U.S. hedge fund need to register with the SEC?

Answer 21

If they have more than 15 U.S. clients and investors with AUM exceeding $25 million

Question 22

What are antifraud prohibitions?

Answer 22

State security laws which make it illegal to obtain funds from investors by making material misstatements or not disclosing key information

Question 23

What are state security laws which make it illegal to obtain funds from investors by making material misstatements or not disclosing key information called?

Answer 23

Antifraud prohibitions

Question 24

What are the two common registration exemptions? What does this mean for the adviser?

Answer 24

The adviser advises on venture capital funds.
The adviser advises on private funds with under $150 million in AUM.

Means not having to comply with the reporting and recordkeeping requirements of the Advisers Act and not being subject to SEC examination. Instead, some of the information on Form ADV needs to be provided to the SEC.

Question 25

What are the 12 matters regulated under the Advisers Act? 1 AAT 2 PF 3. CS 4 PC 5 TP 6 A 7 R 8 PSR 9 C 10 PV 11 CP 12 G+E

Answer 25

1 Adviser agreement terms 2 Performance fees 3 Client solicitation 4 Political contributions 5 Trading practices 6 Advertising 7 Recordkeeping 8 Personal securities reporting 9 Custody 10 Proxy voting 11Compliance program 12 Gifts and entertainment

Question 26

What is covered by Part 1 and Part 2 of Form ADV?

Answer 26

Part 1 of Form ADV covers administrative details of the fund and its staff. Part 2 is the disclosure portion to clients and provides a substantial amount of information, including range of services provided, fees, and conflicts of interest.

Question 27

It is an adviser's legal obligation to deliver Form ADV P2 to clients when? and if this relates to an adviser managing funds, who is the client?

Answer 27

At the beginning, annually, and whenever specific disclosure items change. If an adviser is managing funds, the fund (not the fund investors) is technically the client. However, it is recommended to provide Form ADV Part 2 to both the fund's general or managing partner and the fund investors

Question 28

What is Form CRS?

Answer 28

Form CRS explains fees, conflicts of interest, and a firm's disciplinary history and must be provided to investors before they invest.

Question 29

Why is the level of SEC regulation for alternative investments is markedly different than for other investments, and what is it primarily focused on?

Answer 29

It is presumed that alternatives are for experienced and wealthy investors who do not require protection. As a result, regulation is focused on oversight activities pertaining to the systemic risks to the economy

Question 30

Because SEC registration can be an onerous process, private funds often do what?

Answer 30

They take advantage of an exemption in the Securities Act and sell investments through private placements.

Question 31

Private placements are governed by (1), which allows the sale to any number of (2) and up to (3), subject to (4) and the nonaccredited investors having enough skills to assess their suitability for the investment. General advertising is allowed if (5).

Answer 31

1. Rule 506 of the Securities Act 2. accredited investors 3. 35 nonaccredited investors 4. no general advertising 5. all investors are accredited.

Question 32

An accredited investor is defined as an individual who has

Answer 32

1. net worth exceeding $1 million (excluding the value of the primary residence) or 2. annual income of $200,000 ($300,000 together with spouse) in the current year and each of the two preceding years

Question 33

Although many hedge funds are considered investment companies according to (1), other private funds are able to seek exemptions under two sections of Act. What are these? What does it mean if they meet one of the exemptions?

Answer 33

1. the 1940 Act Section 3(c)(1): the private investment fund exemption Section 3(c)(7): the qualified purchaser fund exemption Meeting either exemption means the fund is not an investment company and is exempt from almost all of the 1940 Act.

Question 34

What is the definition of a qualified purchaser?

Answer 34

A qualified purchaser is defined as either an individual with $5 million or more in investments, an institution with $25 million or more in investments, or an entity where each beneficial owner is a qualified purchaser.

Question 35

What are the two tests for the private investment fund exemption? (40 Act)

Answer 35

(1) 100 or less beneficial owners, and (2) no public offerings, with offerings only to qualified purchasers.

Question 36

Who are included in a firm's 'access persons'?

Answer 36

Firm's directors, officers, partners, and other persons who would be privy to material nonpublic information on securities

Question 37

What is the definition of an advertisement?

Answer 37

An advertisement is any form of written communication on securities directed to multiple individuals through any media outlet.

Question 38

Who performs SEC exams?

Answer 38

the Office of Compliance, Inspections and Examinations (OCIE)

Question 39

What are three types of SEC exams? (NPI, CE, SE)

Answer 39

1. Normal periodic inspections - focus on the marketing materials and the Form ADV to check for any false or misleading statements. 2. Cause exams - arise from specific tips and complaints. 3. Sweep exams - arise because of a compliance problem that the SEC has noted in numerous firms.

Question 40

Institutional investors have fiduciary duties to their own investors, and therefore, often require more information from hedge funds. As a result, hedge funds often provide the following items: - inspection of ___ - QL - AFS

Answer 40

- Inspection of fund books and records - Quarterly letters - Annual financial statements

Question 41

Private fund advisers must meet certain annual reporting requirements - including: 1. SA+OP (5%) 2. D over 100$ 3. FPF 4. Form CPO-PQR 5. RD and BSRF 6. P2P and LR 7. SSR

Answer 41

1. Significant acquisition and ownership positions (Section 13(d) of the Exchange Act). - owning more than 5% of a class of public equity securities with voting rights need to disclose (source and amount of funds, purpose) 2. Discretion over $100M in public equity - holdings and voting power 3. Form PF - such as fund size, leverage, investor types, liquidity, and performance (more details for hedge funds on strategy). Required for AUM over $150M in private funds. 4. Filed with the CFTC by commodity pool operators or commodity trading advisers 5. Regulation D and blue sky renewal filings - for private funds with private offerings greater than one year 6. Pay to play and lobbyist registration - for private fund advisers who lobby U.S. state or local govts 7. Short selling reporting - Required in some countries for short positions in specific investments

Question 42

The ESFS (which stands for?) is made up of the following: 1. A series of NCAs (a CA has power to...) 2. A joint committee of... 3. Additional authorities including (4)

Answer 42

The European System of Financial Supervisors (ESFS) is made up of the following: 1. A series of national competent authorities; a competent authority has the power to regulate or exert control 2. A joint committee of European supervisory authorities 3. Additional authorities including (4): - European Securities and Markets Authority (ESMA): focused on maintaining the stability of the financial system - European Banking Authority (EBA) - European Insurance and Occupational Pensions Authority (EIOPA) - European Systemic Risk Board (ESRB): focused on macroeconomic aspects of the financial system

Question 43

What is ESMA focused on?

Answer 43

European Securities and Markets Authority (ESMA): focused on maintaining the stability of the financial system

Question 44

What is a competent authority?

Answer 44

A competent authority has the power to regulate or exert control

Question 45

What framework outlines the legislative process in the EU for financial services?

Answer 45

The Lamfalussy Framework

Question 46

What does the Lamfalussy Framework outline? What are the levels? (LA, IM, SC, S+E)

Answer 46

Outlines the legislative process in the EU for financial services. Level 1 Legislative Act. Level 2 Implementing Measures (Written and adopted by the EU Commission based on specialist committees, including the ESMA) Level 3 Supervisory Convergence. Strive for consistent application in each country. Level 4 Supervision and Enforcement. Done mainly by regulators in each country

Question 47

Why is the regulatory framework complicated? (Europe vs EU).

Answer 47

The EU does not consist of all the countries in Europe and because EU members have different status levels within the EU. European countries who are not EU members (e.g., Switzerland) may have their own regulations for alternative investments

Question 48

What rules exist when selling non-EU funds in the EU? What might a country have on top?

Answer 48

National private placement rules. Each country within the EU could have additional rules on top of these.

Question 49

What is the main framework for collective investments in EU?

Answer 49

Undertakings for Collective Investments in Transferable Securities (UCITS).

Question 50

What does UCITS stand for?

Answer 50

Undertakings for Collective Investments in Transferable Securities (UCITS)

Question 51

UCITS funds are OE, L, and generally invest in SI that are PT. They are suitable for SI, and leverage amounts are C.

Answer 51

UCITS funds are open-ended, liquid, and generally invest in safe investments that are publicly traded. They are suitable for smaller investors, and leverage amounts are capped.

Question 52

What does AIFMD stand for? What does this cover?

Answer 52

Alternative Investment Fund Managers Directive (AIFMD). The AIFMD covers anything that is not a UCITS fund, such as private equity, venture capital, and hedge funds

Question 53

What directive covers PE and HFs?

Answer 53

The AIFMD covers anything that is not a UCITS fund, such as private equity, venture capital, and hedge funds

Question 54

UCITS and alternative investment funds are both considered to be?

Answer 54

Collective investment schemes (CIS)

Question 55

What is a CIS?

Answer 55

Collective investment schemes (CIS) - includes both UCITS and alternative investment funds

Question 56

AIFs are suitable for LI who do not want to be restricted to S and L investments, and leverage amounts are typically higher than those of ____

Answer 56

AIFs are suitable for larger investors who do not want to be restricted to safe and liquid investments, and leverage amounts are typically higher than those of UCITS funds

Question 57

Four key features of the AIFMD? 1. auth 2. comp 3. lev 4. oversight

Answer 57

1. AIFMs are required to be authorized, subject to any applicable exemption(s). 2. There are caps on compensation for senior management and those in a position to gain. 3. For each AIF, the AIFM must establish a maximum threshold for leverage. 4. AIFMs have oversight duties for liquidity risks and stress tests.

Question 58

What is the point of being compliant with the AIFMD? 1. provides investors... 2. allows AIFMS...

Answer 58

1. provides investors assurance that the investments have a sound basis. 2. allows AIFMS the ability to conduct business in a uniform manner in all EU countries, and that results in much lower compliance costs

Question 59

What entities are exempt from the AIFMD? 1. type 2. investors 3. AUM

Answer 59

Entities exempt from the AIFMD include holding companies, family offices, pension funds, national central banks, and governments that manage Social Security and pension funds AIFMs are also exempt from the AIFMD if they manage AIFs where investors consist of only the AIFM or the parent/subsidiaries. Those investors may not be AIFs. Full AIFMD authorization is not required for AIFMs with AUM below 100 million, or below 500 million on an unlevered basis and no redemption rights for investors for five years. The key requirement is still to register with the local authority

Question 60

What AUM exempts AIFM from full AIFMD registration? What is the key requirement? But what is the result of not registering?

Answer 60

Full AIFMD authorization is not required for AIFMs with AUM below 100 million, or below 500 million on an unlevered basis and no redemption rights for investors for five years. The key requirement is still to register with the local authority. Not having full AIFMD registration results in the denial of a marketing passport, which results in more stringent monitoring by each member state where the AIFM operates.

Question 61

Not having full AIFMD registration results in the denial of ______, which results in ______

Answer 61

Not having full AIFMD registration results in the denial of a marketing passport, which results in more stringent monitoring by each member state where the AIFM operates.

Question 62

EU AIFMs must do the following to receive and maintain authorization from the competent authority: 1. capital 2. compensation 3. RM 4. disc 5. reg req 6. annual

Answer 62

1. Meet initial and subsequent capital requirements 2. Establish compensation guidelines for top management and staff where compensation may significantly affect the AIMF's risk profile 3. Create an independent risk management group 4. Provide disclosures to investors of specific information initially and on a continuing basis 5. Satisfy the regulatory requirements of the competent authority of the home member country 6. Produce an annual report of the AIF

Answer 64

The disclosures include investment fund strategy and objective, valuation methods, liquidity, and fees.

Question 65

What kind of disclosures are usually provided in a fund's offering memorandum?

Answer 65

Investment fund strategy and objective, valuation methods, liquidity, and fees

Question 66

Marketing of AIFs by AIFMs in the EU occurs in two ways: 1. MP - has benefit of ? 2. PP

Answer 66

1. with a marketing passport - allows marketing of AIFs to professional investors throughout the EU, subject to only one set of rules 2. marketing in certain EU member countries under the country's private placement rules

Question 67

Requirements in risk management include: 1. independent 2. continuous - including (3) 3. lev 4. consideration of (4)

Answer 67

1. Risk management must be independent from portfolio management 2. All risks to be properly measured and evaluated continuously. Continuous oversight activities include stress testing, backtesting, and scenario analysis. 3. No "hard" amounts of permissible leverage, a reasonable amount is permissible 4. Consideration of key risks such as market, liquidity, counterparty, and operational

Question 68

What are three continuous oversight activities for risk management?

Answer 68

Continuous oversight activities include stress testing, backtesting, and scenario analysis.

Question 69

What are three types of reports required under AIFMD? 1. AR (includes...) 2. PR (depends on, and includes...) 3. ROMC

Answer 69

1. annual report - includes a balance sheet and income statement plus material changes over the past year and compensation details for key staff 2. periodic reports (depending on the size of the AIF/AIFM) - include information such as the key market and instruments in which the AIFM operates, key exposures and concentrations for individual AIFs, risk profile and risk management tools, stress test results 3. reports of material changes

Question 70

When do asset stripping rules apply? What do they mean?

Answer 70

Asset stripping rules apply when AIFs invest in unlisted companies. The rules would not allow an AIF to take a controlling stake in a private equity investment that takes on debt in order to pay the AIF a dividend because it increases leverage and risk. Asset stripping rules remain for two years after purchasing the nonlisted company.

Question 71

Why would asset stripping rules not allow an AIF to take a controlling stake in a private equity investment that takes on debt in order to pay the AIF a dividend?

Answer 71

because it increases leverage and risk

Question 72

How long do asset stripping rules remain in place?

Answer 72

Asset stripping rules remain for two years after purchasing the nonlisted company.

Question 73

Two countries where AIFs are frequently domiciled?

Answer 73

Luxembourg and Ireland.

Question 74

The following legal structures exist in the EU: 1. IC/VCC 2. ICAV 3. UT 4. CC 5. RAIF 6. SICAV 7. SIF

Answer 74

1. Investment company/variable capital company (used by UCITS and AIFs to pool funds). 2. Irish Collective Asset Management Vehicle - used by UCITS and AIFs in Ireland to reduce administration costs 3. Unit trust - Trustee acts on behalf of investors as the legal owner of fund assets; trustee engages management company to invest assets. 4. Common contractual - investors are co-owners of the fund's assets as in a direct proportionate share of the assets; used by UCITS and AIFs in Ireland 5. Reserved Alterative Investment Fund (RAIF). Used by AIFs in Luxembourg and does not require regulatory approval prior to being established 6. Société d'Investissement à Capital Variable (SICAV). Public limited company with variable share capital in Luxembourg. 7. Specialized investment funds (SIF). For qualified investors in Luxembourg.

Question 75

In EU, each member state designates a national regulator to ESMA's board. If two member states are unable to come to an agreement on enforcement steps...

Answer 75

The ESMA could step in to impose binding mediation

Question 76

What is one key exception to ESMA's influence through mediation? (S, S, PO)

Answer 76

The AIFMD sovereignty exemption - the member state can choose not to cooperate if by doing so, it negatively impacts its sovereignty, security, or public order

Question 77

Home member state vs host state?

Answer 77

The home member state is the country in which the AIFM is authorized, while the host state is the country where the AIF is marketed.

Question 78

When can host competent authorities audit AIFs?

Answer 78

Host competent authorities are able to audit AIFs on an unannounced basis. Should it be alleged that an AIF committed an illegal act in a host state, then the AIFMD has guidelines regarding subsequent procedures and enforcement actions. If an illegal act occurs in a host state, and it is beyond the host state's jurisdiction, then it is possible to contact authorities in the AIFM's home state for further action.

Question 79

What is the Act/law and the main reg body in HK?

Answer 79

SFO - Securities and Futures Ordinance (contains the main laws regarding asset management regulation). SFC - Securities and Futures Commission is the regulating authority to enforce the SFO

Question 80

In Hong Kong, how may AIFMs by-pass registration procedures involving the SFO and SFC?

Answer 80

They can avoid registration by selling investments on an unsolicited basis via private placement. The fund's offer and marketing activities must not be reasonably perceived as a public offering or else registration is required.

Question 81

In HK, if an AIFM sells investments on an unsolicited basis via private placement, they can...

Answer 81

Avoid registration procedures involving the SFO and SFC

Question 82

To avoid registration with the SFO and SFC in HK, four requirements regarding offers must all be met: 1. # 2. HKD$ min per person 3. HKD total max 4. prof

Answer 82

1. Maximum 50 persons 2. Minimum amount per person of HKD 500,000 3. Maximum amount of HKD 5 million 4. Professional investor, which would be financial institutions and intermediaries but not individuals or holding companies controlled by individuals

Question 83

In Singapore, what is the legal term for an investment fund>

Answer 83

Collective investment scheme (CIS) is the legal term for an investment fund.

Question 84

What is the main regulatory body in Singapore, and the regulatory Act.

Answer 84

The Securities and Futures Act (SFA) contains the main laws regarding asset management regulation. The Monetary Authority of Singapore (MAS) is the regulating authority.

Question 85

In Singapore, what is the name for the legal entity for investment funds that allows for economies of scale for fund managers through the creation of an umbrella fund structure? This is the umbrella containing what?

Answer 85

A Variable Capital Company (VCC). It contains a collective investment scheme (CIS) which is the fund itself.

Question 86

In Singapore, what is the benefit of a VCC? (2)

Answer 86

A Variable Capital Company (VCC) is an umbrella structure containing CISs - this will allow CIS to have more flexibility in redeeming shares of multiple investment vehicles and allows VCC to share board of directors and service providers across fund types

Question 87

In Singapore, fund managers must be licensed and subject to the provisions of the SFA. They must have (1) or do (2)

Answer 87

They must have a capital markets services (CMS) license or They must register with the MAS (Monetary Authority of Singapore) as a registered fund management company (RFMC).

Question 88

Why might a fund manager in Singapore have an exemption from CMS licensing? 1. # 2. AUM 3. RFMC

Answer 88

1. there is a maximum 30 qualified investors (maximum of 15 of them being funds or limited partnerships) 2. total AUM does not exceed $250M (per SFA) 3. they are registered as an RFMC with the MAS

Question 89

In Singapore, what is the difference for venture capital funds with regard to registration etc.

Answer 89

They must have a CMS licence, but there is a fast-tracked application process and the absence of many onerous regulations

Question 90

What are two conditions which Offers of interests to Singapore residents are subject to? 1. auth/rec 2. prospectus

Answer 90

1. The fund must be authorized (registered fund established locally) or recognized (registered fund established overseas) by the MAS. 2. The offer includes a prospectus that meets the SFA's requirements and is registered with the MAS.

Question 91

Offering a foreign CIS in Singapore requires ____ or the use of

Answer 91

Requires a license or the use of a local licensed intermediary such as a placement agent.

Question 92

Act and two bodies in South Korea?

Answer 92

The Financial Investment Services and Capital Markets Act (FSCMA) contains the main laws regarding asset management regulation. The Financial Services Commission (FSC) is the regulating authority, and it manages the Financial Supervisory Service (FSS), the latter of which performs inspections and enforces the regulations.

Question 93

In Korea, advertising must be ...

Answer 93

All advertising must be done locally by a Korean securities firm, bank, or insurance company that is authorized to distribute funds.

Question 94

All foreign funds offered to Korean investors must be registered with -----

Answer 94

The FSC (Financial Services Commission)

Question 95

In Japan, what are the two Acts and one regulatory body?

Answer 95

The Financial Instruments and Exchange Act (FIEA) and the Act on Investment Trust and Investment Corporation (ITIC) contain the main laws regarding asset management regulation. The regulatory authority is the Kanto Local Finance Bureau of Ministry of Finance Japan (KLFB).

Question 96

In Japan, registration as an investment manager is generally required; however, foreign funds that are already represented in Japan could ...

Answer 96

Qualify for a limited exemption under Article 63 of FIEA that still subjects the foreign funds to onerous regulations.

Question 97

All entities selling funds to Japanese investors must be (1). If foreign funds are not directly marketed to Japanese investors, then (2).

Answer 97

1. registered with the Financial Services Agency of Japan 2. registration is not necessary

Question 98

Developing a geopolitical framework of analysis leads to the determination of GB, which is applied to G and IE when computing ER.

Answer 98

Developing a geopolitical framework of analysis leads to the determination of geopolitical beta, which is applied to growth and inflation expectations when computing expected returns.