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IMC Key Points > 3 > Flashcards

3 Flashcards

1
Q

What are European Union Directives?

A

They are issued under section 58 of the European Treaty and have to be complied with by all EU member states. The aim of the directive is the harmonisation of laws across EU member states

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2
Q

What is a directive?

A

It prescribes a particular result to be achieved by a particular date. It is left to EU member states to implement the directive into national law

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3
Q

What are the two methods of implementing a directive?

A
  1. by primary legislation
  2. by delegated legislation under section 2 of the European communities act (1972)
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4
Q

What is the Markets in Financial Instuments Directive (MiFID)?

A

It enables an investment firm established in one EU Member state to operate throughout the European Economic Area (EEA) without separate authorisation by the Member States in which it does business

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5
Q

When did MiFID II come into effect?

A

January 2018

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6
Q

What are the Undertakings for Collective Investment in Transferable Securities Directives? (UCITS)

A

It gives automatic recognition in the UK to other collective investment schemes constituted in an EU Member State other than the UK

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7
Q

What is the Alternative Investment Fund Managers Directive? (AIFMD)

A

Was implemented in 2013 and covers the management, administration and marketing of alternative investment funds (AIFs)

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8
Q

What is the European Market Infrastructure Regulation (EMIR)

A

Came into force on 16 August 2022 and covers OTC derivatives, central counterparties (CCPs) and trade repositories. EMIR requires anyone who has entered into a derivatives contract to report and risk manage their derivative positions

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9
Q

What is the Benchmarks Regulation?(BMR)

A

It was introduced in 2018 to address the risk that benchmarks were susceptible to manipulation, as revealed by the LIBOR and EURIBOR scandals

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10
Q

What is the Foreign Account Tax Compliance Act? (FATCA)

A

It is a US law to prevent tax evasion by US citizens using offshore banking facilities

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11
Q

What is LIBOR?

A

London Inter-bank Offered Rate

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12
Q

What is EURIBOR?

A

Euro Interbank Offered Rate

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13
Q

What is the Common Reporting Standard? (CRS)

A

An information standard for the automatic exchange of tax and financial information on a global level, which was developed in 2014 by the OECD

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14
Q

What is the OECD?

A

The organisation for Economic Co-operation and Development

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15
Q
  1. Regulatory body - FCA
A

The Financial Conduct Authority - responsible for regulating the conduct of business (although will also prudentially regulate all but the largest financial firm)

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16
Q
  1. Regulatory body - PRA
A

Prudential Regulation Authority - responsible for the prudential regulation of banks, insurance companies and systemically important investment firms

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17
Q
  1. Regulatory body - FPC
A

Financial policy committee - responsible for macro-prudential (systemic) regulation of the financial system

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18
Q

Three operational objectives of the FCA

A
  1. The consumer protection objective
  2. The integrity objective
  3. The competition objective
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19
Q

What is the Competition and Markets Authority? (CMA)

A

It largely acts as an independent competition authority. The Secretary of State at the Department for Business, Energy and Industrial Strategy (BEIS) will only intervene in exceptional cases where there are public interest issues

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20
Q

When must the CMA investigate?

A

All mergers where the merged company will control greater than 25% of the UK market, or where UK turnover of the target firm exceeds £70 million

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21
Q

What is the Panel on Takeovers and Mergers? (PTM)

A

They are responsible for enforcing the City Code on Takeovers and Mergers

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22
Q

Explain what a bidder acquring more than 30% of voting rights must do

A

A bidder acquiring more than 30% of the voting rights of a company is required to make a cash offer to other shareholders

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23
Q

Explain what a company acquiring 90% must do

A

Where a company acquires 90% of another company, it can force the remaining shareholders to sell their shares

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24
Q

What is GDPR?

A

General Data Protection Regulation

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25
Q

What does the information commissioner do?

A

The person responsible for regulating compliance with the GDPR

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26
Q

Who can undertake investment business in the UK?

A

Anyone who undertakes investment business in the UK has to be an authorised person, passported under an EU directive or an exempted person

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27
Q

What is the Regulated Activities Order?

A

The investment activities that require regulation

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28
Q

What is set out in the Regulated Activities Order

A

Specified investments are set out in the regulated activities order and include investments other than physical objects. Deposits and general insurance contracts are also regulated

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29
Q

Who are classed as exempt?

A

Some investment persons are classed as exempted and hence do not require authorisation. Appointed representatives are an example of an exempted person

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30
Q

What is the main purpose of Senior Management Arrangements, Systems and Controls? (SYSC)

A

To encourage firms’ directors and senior managers to take appropriate practical responsibility for their firms’ arrangements on matters of interest to the FCA

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31
Q

What is the common platform

A

The common platform is a unified set of organisational requirements in SYSC 4-10 which applies to all firms except insurers, managing agents and the Society of Lloyds

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32
Q

What is the Pensions Act 2004?

A

It requires trustees to appoint their own actuary, auditor, legal and financial advisers

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33
Q

What are trustees responsible for?

A

Trustees are responsible for, in consultation with the sponsoring employer, to produce a statement of investment principles (SIP). This sets out in writing the trustees’ attitude to various issues, including:
1. the scheme-specific funding requirement;
2. the nature of investments held by the fund; and
3. the risk of the fund.
The SIP is to be reviewed every three years

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34
Q

When may trustees appoint an investment manager?

A

Where the trust instrument allows, trustees may appoint an investment manager to carry out investment policies. Where the trust instrument does not allow this, the trustees must select investments themselves, although they must seek investment advice

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35
Q

What did the Pensions Act 2004 also introduce?

A

The scheme-specific funding requirement, which requires all occupational defined benefit (DB) schemes to be periodically valued by an actuary

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36
Q

What does The Pensions Regulator do? (TPR)

A

Investigates occupational pension schemes in response to infringement of statutory rules

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37
Q

What does the FCA handbook cover?

A

All aspects of FCA regulation

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38
Q

What are the Conduct of Business (COBS) rules?

A

They apply to all firms conducting designated investment business

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39
Q

What do the eleven Principles for Business do? (PRIN)

A

They set out the standards expected of all authorised persons

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40
Q

What does a breach of a principle of PRIN mean?

A

A breach of a principle does not, of itself, enable any person to initiate a court action against an FCA-regulated firm, but it will be taken into account by the FCA for purposes of its disciplinary and intervention powers

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41
Q

What is Part 4A permission?

A

A UK firm undertaking investment business must apply to the FCA for Part 4A permission. The permission granted will specify the scope of the activites and investments that the firm is authorised to undertake. Limitations or requirements may also be imposed by the FCA

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42
Q

How does an applicant gain Part 4A permission?

A

An applicant must satisfy the threshold conditions

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43
Q

What must happen before an investment firm can undertake a controlled function?

A

They must first be approved by the FCA

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44
Q

What are the 5 categories of fuctions that are classified as controlled functions?

A
  1. Governing functions;
  2. Required functions;
  3. Systems and control functions;
  4. Significant management functions; and
  5. Customer functions
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45
Q

How many statments of principle are there with which approved persons must comply

A

7

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46
Q

What does the approved status regime allow the FCA to do

A

It allows the FCA to discipline an individual without the firm being disciplined

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47
Q

When can an individual operate without close supervision?

A

Where an individual has attained threshold competence

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48
Q

What do the professionalism requirements for retail investment advisers require advisers to do?

A
  1. subscribe to a code of ethics;
  2. hold an appropriate qualification;
  3. carry out at least 35 hours’ continuous professional development a year; and
  4. hold a statement of professional standing from an accredited body
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49
Q

What does MiFID do?

A

The FCA recognises and supervises a number of exchanges; it requires high standards of investor protection and investor integrity. MiFID introduced requirements regarding pre- and post-trade transparency

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50
Q

When does the LSE admit companies?

A

The LSE admits companies if they satisfy the criteria of the UK Listing Authority (UKLA). The Prospectus Directive allows capital-raising in any EU country. Listing on AIM requires different and less onerous size, and meeting other requirements than on the main markets

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51
Q

Who regulates derivatives exchanges?

A

In the UK, derivatives exchanges are regulated by the FCA. In the UK, clearing takes place through LCH Ltd

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52
Q

What did MiFID do for commodity futures?

A

It brought them into the list of regulated investments, and introduced new rules for pre- and post-trade transparency

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53
Q

What is IFRS 9?

A

It requires derivatives to be measured at fair value for accounting purposes

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54
Q

What is a client classed as?

A

A retail client, professional client, or an eligible counterparty

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55
Q

What would a professional client be?

A

An investment company, a local or public authority, or large company

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56
Q

When can an expert retail client be classed as a professional client?

A
  1. The client has sufficient experience or understanding (and, for MiFID business, passes a quantitative test relating to size of portfolio, etc);
  2. The client is given written warning of the protections lost; or
  3. The client has given written consent
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57
Q

When will an authorised firm be classified as an eligible counterparty?

A

For specific types of business

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58
Q

What can a large undertaking be classified as?

A

An elective eligible counterparty providing consent is obtained

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59
Q

What should a retail client be provided with?

A

A client agreement before any business is undertaken

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60
Q

What must an inducement paid to an investment firm do?

A

It must designed to enhance the quality of the firm’s services

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61
Q

What do the Financial Promotion Rules do?

A

They set the standard for determining whether a promotion is fair and reasonable. They apply mainly to promotions aimed at retail clients

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62
Q

When do exceptions to financial promotion rules apply?

A
  1. One-off promotions;
  2. Generic advertising; and
  3. Financial promotions aimed at investment professionals and elegible counterparties
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63
Q

An unsolicited call to obtain investment business is prohibited except when?

A

Where calling on:
1. Investment professionals; and
2. Retail clients where the client agreement permits this

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64
Q

What are direct offer promotions?

A

They are promotions aimed at retail clients containing an offer, or an invitation to respond by making an offer, to enter into an investment agreement

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65
Q

What has been the case since Jan 2013?

A

A firm giving investment advice to a retail client in the UK to invest in a retail investment product no longer earns commission set by the product provider

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66
Q

What must a firm providing investment services other than advice or discretionary portfolio management do?

A

They are required to assess the appropriateness of services or products for clients

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67
Q

What must a firm offering independent advice have?

A

Knowledge of the full range of retail investment products

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68
Q

What must a firm establish and keep up to date?

A

A best execution policy

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69
Q

What must firms be able to demonstrate?

A

They have executed client orders in accordance with the firm’s policy

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70
Q

What should a firm provide a retail client prior to provision of its services?

A

Its order execution policy

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71
Q

When should a firm review its best execution and order execution policies?

A

Annually, or where there is a change

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72
Q

When are firms allowed to execute orders through a broker for commission in return for receiving goods and services?

A

When the goods and services consitute research or will assist the firm in the provision of its services

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73
Q

What must a firm makes its employees aware of?

A

The FCA restrictions on personal account dealing and must keep a record of any personal transactions

74
Q

How should firms address potential conflicts of interest?

A

They should take reasonable steps to:
1. Identify conflicts of interest
2. Maintain and operate effective organisational and administrative arrangements to prevent conflicts of interest resulting in a material risk of damage to clients’ interests; and
3. Discole conflicts where there remains a risk of damage to clients’ interests

75
Q

What must a common platform firm do?

A

They must establish, implement and maintain an effective conflicts of interst policy that is set out in writing

76
Q

What does investment reseach mean?

A

Research containing analysis and recommending an investment strategy

77
Q

What are investment analysts or firms providing investment research not permitted to do?

A

To deal ahead of publication to clients for whom the research is intended

78
Q

What are packaged products?

A

Investment products designed for retail clients, and include life policies, personal pensions and authorised unit trusts

79
Q

What must a firm provide when recommending a packaged product to a retail customer?

A

Key features of the product in written form

80
Q

What is one of the key provisions of the UCITS IV directive? (implemented in 2011)

A

The introduction of the key investor information document (KIID). This provides key facts about a UCITS scheme to retail investors

81
Q

What do packaged retail and insurance-based products require? (PRIIPS)

A

The provision of a key information document (KID)

82
Q

How long must a firm normally keep records of advice given to customers and of any cancellations?

A
  1. Five years for life policies, pension contracts or stakeholder pensions; and
  2. Three years for other packaged products
83
Q

Describe retail investment products?

A

They are wider than the category of packaged products, including investments that offer exposure to an underlying financial asset, in a packaged form

84
Q

What does fiduciary duty mean?

A

To act in the best interest of another party

85
Q

What must a firm that has safekeeping of a clients’ investments do?

A

They must register the investments in the name of the customer or another prescribed manner and always keep them segregated from the firm’s investments

86
Q

What must a firm do with client money?

A

A firm must comply with the client money rules and keep clients’ money separate from its own in a client bank account or other authorised fund

87
Q

What must a firm record accurately?

A

A firm must maintain accurate records of money and assets at all times, and reconcile as often as necessary

88
Q

What is a mandate?

A

A mandate is any means taht give a firm the ability to control a client’s assets or liabilities

89
Q

What does the FCA have the power to do?

A

To require a firm to produce information. It can issue a private warning or a public statement about breaches of rules. It can also impose fines on firms for breaches of rules, and in extreme cases, cancel a firm’s permission

90
Q

Who can a firm appeal to against a decision made by the FCA?

A

To the Tax and Chancery Chamber of the Upper Tribunal

91
Q

What does the Financial Services Act 2012 do?

A

It gives the FCA the power to ban products that it believes provide an unacceptable risk to consumers. It also gives the FCA the power to ban misleading financial promotions

92
Q

What must a firm ensure in relation to its complaints procedures?

A

That they are set out in writing and that this document is made available to each person engaged in the firm’s business

93
Q

When can a complainant complain to the FOS?

A

A complainant has a right to complain to the Financial Ombudsman Service (FOS) if the complain is not settled by the firm within eight weeks

94
Q

What is the FOS

A

Financial Ombudsman Service

95
Q

What is the maximum award of the FOS?

A

£375,000 for complaints referred after 1 April 2020

96
Q

What does the Financial Services Compensation Scheme deal with? (FSCS)

A

Claims against authorised firms that are insolvent or no longer trading

97
Q

What is the FSCS?

A

Financial Services Compensation Scheme

98
Q

What is the maximum payout from the FSCS for protected investment business?

A

£85,000

99
Q

What is money laundering?

A

It is the process by which criminals hide the source of their proceeds of crime. It is an offence for an investment business not to have in place procedures for preventing and investigating money laundering or terroist financing transactions

100
Q

What provides the legislative framework for money laundering offences?

A

The Proceeds of Crime Act 2002, the Money Laundering Regulations (2017) as amended by the Money Laundering Regulations (2019)

101
Q

What is POCA?

A

The Proceeds of Crime Act 2002

102
Q

What should all investment firms appoint in reference to money laundering?

A

A money laundering reporting officer

103
Q

What must firms do to those they do business with?

A

Obtainevidence of indentity of those they do business with and report suspicious transactions

104
Q

What does the FCA place emphasis on when determining whether a firm has breached the rules on money laundering?

A

The guidance provided by the Joint Money Laundering Steering Group

105
Q

What is the Criminal Justice Act 1993?

A

It makes insider dealing a criminal offence

106
Q

What are the three principal offences of insider dealing?

A
  1. Dealing while in possession of inside information,
  2. Encouraging another to deal on the basis of inside information; and
  3. Disclosing inside information to another (other than in the proper performance of one’s duty?
107
Q

What is inside information?

A

Price-sensitive information of a specific and precise nature

108
Q

What gives guidance on what constitutes market abuse?

A

The FCA rules on market conduct (MAR1)

109
Q

What is MAR1?

A

The FCA rules on market conduct

110
Q

Describe market abuse

A

Market abuse is a civil offence. The FCA can impose a financial penalty or make a statement to the effect that a person has engaged in market abuse

111
Q

What must happen for market abuse to occur?

A

The behaviour must relate to a qualifying investment traded on a prescribed market

112
Q

What behaviour constitutes a safe harbour in relation to market abuse?

A

There are certain types of behaviour which consitute a safe harbour in relation to market abuse. These include behaviour in accordance with the price stabilisation rules

113
Q

What is the Bribery Act 2010?

A

It introduces four offences:
1. Paying bribes - active bribery (offer, promise, pay);
2. Receiving bribes - passive bribery (receive, request, agree to receive);
3. Bribing foreign public officials; and
4. Failure of a commercial organisation to prevent bribery

114
Q

What is the Criminal Finances Act 2017?

A

It targets corruption, money laundering and tax evasion. It aims to make it easier to seize funds obtained through criminal means

115
Q

When was the FSAP launched, and what is it?

A

The financial services action plan - launched in 1999

116
Q

What are the objectives of FSAP

A
  1. To create a single EU wholesale market
  2. To achieve open and secure retail markets
  3. To create state of the art prudential rules and structures of supervision
117
Q

Which authorities were created after 2008?

A
  1. ESMA - European Securities and markets authority
  2. European Banking Authority (EBA)
  3. European Insurance and occupational pensions authority (EIOPA)
118
Q

What are the main powers of ESMA?

A
  1. ability to draft technical standards that are legally binding in EU member states
  2. ability to launch a fast track procedure to ensure consistent application of EU law
  3. resolve disagreements between national authorities
  4. additional responsibilities for consumer protection
  5. emergency powers
  6. participating in college of supervisors and onsite inspections
  7. monitoring systemic risk of cross border financial institutions
  8. ability to enter into administrative arrangements with supervisory authorities, international organisations, and the administrations of third countries
119
Q

Level 1

A

directives and regulations set the high level political objectives on the area concerned

120
Q

Level 2

A

ESMA plays primary role in level 2 in drafting subordinate acts

121
Q

Level 3

A

ESMA develops guidelines and recommendations with a view to establishing consistent, efficient and effective supervisory practices and to ensure consistent applcation of EU law

122
Q

Level 4

A

A fast track procedure has been introduced by ESMA

123
Q

Explain MiFID in more detail

A

Investment Services Directive (ISD) created a single passport under which authorised firms incorporated in an EU state can engage throughout EEA. This was superseded by MiFID in Novemeber 2007. It brought about some changes including:
1. upgraded advice which involves a personal recommendation to be a core investment service
2. clarified that operating a MTF is covered by the passport
3. extended the scope of the passport to cover commodity derivatives

124
Q

When was MiFID II introduced?

A

In January 2018 along with associated regulation MiFIR. It distinguishes between investment services and activities and ancillary services.

125
Q

What is MiFIR?

A

A related regulation that came into force at same time as MiFID II but does not need to be implemented into national law. Sets out a number of reporting requirements in relation to the disclosure of trade data to public and competent authorities

126
Q

What is the management directive?

A

Increases the scope of management companies’ activites that can be passported to include discretionary management, safekeeping and fund administration. Also aims to protect investors by ensuring companies are suitably capitalised and have risk management and reporting measures in place

127
Q

What is AIFMD

A

The alternative investment fund managers directive which was implemented in 2013. It regulates AIF managers rather than AIFs themselves. The AIFMD requires authorisation of an AIFM with the home state regulator if they have assets under management in AIFs above:
1. euro 100m if any of the AIF uses leverage, or
2. euro 500m if no leverage and do not give investors a right of redemption within 5 years of initial investment in each AIF

128
Q

What is a small UK AIFM?

A
  1. an internal AIFM of a corporate body, such as investment trust
  2. unauthorised manager of proerty funds, operated by an FCA authorised operator
  3. fund manager that has applied for registration under the European Venture Capital Funds Regulation or European Social Entreprenuerhsip Funds Regulation
129
Q

What is a benchmark administrator?

A

Has control over the provision of a benchmark that is used in financial instruments

130
Q

What is a supervised contributor?

A

An authorised person that contributes input data to an administrator located in the EU

131
Q

Explain FACTA (foreign tax account compliance act)

A

Requires foreign financial institutions (FFIs) to provide information about their US customers to the IRS in accordance with the terms of an FFI agreement entered into betwen the FFI and the IRS. If it enters the FFA agreemement, the FFI is known as a participating FFI. If it does not, it is non paricipating FFI and a 30% withholding tax charge is applied to certain payments/

132
Q

FFI is an entity that:

A
  1. accepts deposits in the ordinary course of a banking or similar business
  2. holds financial assets for the account of others as a substantial proportion of its business
  3. engages primarily in trading financial instruments, managing portfolios, or administering or managing funds or money
  4. conducts certain business as an insurance company
133
Q

Two main kinds of authorised person

A
  1. A person who is authorised because of Part 4A permission, who must apply to the FCA under Part 4A of the FSMA
  2. A person who qualifies for authorisation. This is a person from an EEA state who is authorised in their own state and can carry investment business in the UK under the passporting rules
134
Q

What is the Trustee Act 2000?

A

Allows a trustee to make any kind of investment including in land and property. In exercising this power, a trustee must obtain proper advice and have regard to the standard investment criteria which are:
1. the suitability to the trust of an investment
2. the need to diversify investments as appropriate for the circumstances of the trust

135
Q

What are the main options of DC pensions?

A
  1. Taking an uncrystallised funds pension lump sum (UFPLS) where money is drawn from the fund without purchasing annuity or enetering into a drawdown plan. 25% of the UFPLS will be tax free. One or more UFPLS payments can be taken over retirement period on a regular or irregular basis
  2. Purchasing a lifetime annuity with some or all of the accumulated fund that pays income until death.
  3. Entering a flexi-access drawdown plan. From 6 April 2015 no limits that can be taken from drawdown fund each year
136
Q

Pensions Schemes Act 2021

A

Introduces enhanced enforcement powers for TPR, additional DB scheme funding requirements, changes to transfer rights, new climate change risk governance requirements and a legislative framework for collective money purchase pension schemes

137
Q

What is the FX Global Code?

A

Maintained and updated by global FX committee, the code sets global principles of good practive standards in the FX market, promoting integrity and effective function of wholesale FX market

138
Q

What is UK money markets code?

A

Maintained and updated by money markets committee, sets standard and best practice expected from participants in the deposit, repo and securities lending markets in UK

139
Q

Standards of lending practice for business customers

A

maintained and updated by LSB, the standards set the benchmark for good lending practice in the UK, outlining the way registered firms are expected to deal with their business customers throughout the entire product life cycle

140
Q

Global precious metals market code

A

Prepared by the london bullion market associated, the code sets out standard expected from market participants in the global OTC wholesale precioous metals market

141
Q

FCA handbook blocks

A
  1. High level standards
  2. Sets out the prudential requirements that affect firms
  3. Business standards
  4. Regulatory process
  5. Redress - deals with processes for handling complaints and compensation
  6. Specialist sourcebooks
  7. Listing, prospectus and disclosure
142
Q

Eleven principles for PRIN

A
  1. Integriny
  2. Skill, care, and diligence
  3. Management and control
  4. Financial prudence
  5. Market conduct
  6. Customers’ interest
  7. Communications with clients
  8. Conflicts of interest
  9. Customers- relationships of trust
  10. Clients’ assets
  11. Relations with regulators
143
Q

What is the common platform?

A

Set of organisational requirements in SYSC 4-10 which applies to all firms except insurers, managing agents and society of Lloyd’s

144
Q

SYSC 4

A

General organisational requirements

145
Q

SYSC 5

A

Employees, agents and other relevant persons

146
Q

SYSC 6

A

Compliance, internal audit, and financial crime

147
Q

SYSC 7

A

Risk control

148
Q

SYSC 8

A

Outsourcing

149
Q

SYSC 9

A

Record-keeping

150
Q

SYSC 10

A

Conflicts of interest

151
Q

SYSC 11-17

A

Set out the risk management and prudential requirements relating to banks and insurance companies and cover risk management systems for liquidity, operational, group, credit, market, insurance risk and prudential requirements

152
Q

SYSC 18

A

Whistleblowing

153
Q

SYSC 19

A

Remuneration

154
Q

Who are the most important exempt persons?

A
  1. appointed representatives of an authorised person
  2. RIEs and RCHs
  3. members of the professions
  4. members of Lloyd’s
155
Q

What did the Financial Services act 2013 implement

A

The SM&CR which replaced the Approved Persons Regime. The new regime consits of
1. Senior Managers Regime (SMR)
2. A certification regime
3. Conduct Rules

156
Q

What are the three main types of responsibility under the senior mangers regime

A
  1. Senior management functions (SMFs)
  2. Prescribed responsibilities
  3. Key functions
157
Q

Individual conduct rules

A
  1. Act with integrity
  2. Act with due care, skill and diligence
  3. Open and co-operative with FCA, PRA and other regulators
  4. Pay due regard to interests of customers and treat them fairly
  5. Observe proper standards of market conduct
158
Q

Senior manager conduct rules

A

SC1. Take reasonable steps to ensure business is controlled effectively
SC2. Take reasonable steps to ensure business complies with relevant requirements and stanards of the regulatory system
SC3. Take reasonable steps to ensure any delegation of responsibilities is to an appropriate person and discharge of delegated responsibility is overseen effectively
SC4. Disclose appropriately information the FCA or PRA would reasonably expect notice

159
Q

Financial Services Act 2012 for BoE

A

Makes the BoE for regulating settlement systems and RCHs. The BoE is responsible for the regulation of recognised payments systems under the Banking Act 2009

160
Q

What does MiFID II extend to?

A
  1. depositary receipts
  2. etfs
  3. certificates and similar instruments
  4. bonds, structured products
  5. emission allowances and traded derivatives
161
Q

What is a trader?

A

Acting either on their own or on their company’s behalf

162
Q

What is a broker?

A

Acting on somebody else’s behalf. Makes profit from charging commission on the trading done for others

163
Q

What is a clearing house?

A

A clearing house is a financial institution formed to facilitate the exchange of payments, securities, or derivatives transactions. The clearing house stands between two clearing firms. Its purpose is to reduce the risk of a member firm failing to honor its trade settlement obligations.

164
Q

What are the clearing thresholds?

A
  1. €1bn in gross notional value for OTC credit and equity derivatives
  2. €3bn in gross notional value for interest rate and foreign exchange, and
  3. €3bn in gross notional value for commodities and others
165
Q

What is COBS 6.1B.9?

A

A firm that offers to faciliate, directly or through a third party, the payment of adviser charges, including by means of a platform service must:
1. obtain and validate instructions from a retail client in relation to an adviser charge,
2. offer sufficient flexibility in terms of the adviser charges it facilitates, and
3. not pay out or advance adviser charges to the firm to which the adviser charge is owed over a materially different time period or on a materially different basis to that in which it recovers the adviser charge from the retail client

166
Q

What is churning?

A

Relates to investments generally. A firm may buy/sell shares frequently in a way that is not in the best interests of the firm

167
Q

What is switching?

A

Refers to moving a client’s investments within and between packaged products when it is not in the client’s best interests

168
Q

What is the FCA’s supervision model based on

A
  1. Firm systematic framework
  2. Event-driven work
  3. Issues and products
169
Q

Firm systematic framework

A

Preventative work through structured conduct assessment of firms

170
Q

Event-driven work

A

Dealing with problems that are emerging or have happened, and securing customer redress or other remedial work where necessary. This will cover issues that occur outside the firm assessment cycle

171
Q

Issues and products

A

Intensive campaigns on sectors of the market or products within a sector that are putting or may put consumers at risk

172
Q

Three stages of laundering process

A
  1. Placement
  2. Layering
  3. Integration
173
Q

What is placement (laundering)?

A

The physical injection into the financial system of cash proceeds obtained from criminal activity

174
Q

What is layering (laundering)?

A

The separation of criminal proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail

175
Q

What is integration (laundering)?

A

The provision of apparent legitimacy to criminally derived wealth. Integration schemes place the laundered proceeds back into the economy in such a way that they appear to be legitimate investment funds

176
Q

What is the legislation covering insider dealing?

A

The Criminal Justice Act 1993 (CJA), Part V, which came into force in April 1994

177
Q

What is a Chinese wall?

A

Chinese walls may be erected in firms to protecct against insider dealing. A Chinese wall refers to an information barrier between different divisions of an institution to avoid conflicts of interest

178
Q

What is insider dealing?

A

Where an insider deals, or attempts to deal, in a qualifying investment or related investment on the basis of inside information

179
Q

What is the Bribery Act 2010

A

Came into force on 1 July 2011. This Act repeals and replaces the old laws on bribery with a new comprehensive anti-bribery code

180
Q

What is the UK Criminal Finances Act 2017?

A

Targets corruption, money laundering and tax evasion. It aims to make it easier to seize funds obtained through criminal means.

181
Q

What changes does the UK Criminal Finanaces Act 2017 make?

A
  1. Improved ability to investigate the proceeds of crime
  2. Reform of the suspicious activity reports regime
  3. Improved civil powers to recover proceeds of crime
  4. Measures to combat terroist financing
  5. New corporate tax offences to prevent the faciliation of tax evasion

IMC Key Points (7 decks)

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