3.1: International Regulation

Question 1

Level 1 ESMA

Clue (high level) (2)

Answer 1

The European Securities and Market Authority can be asked to provide technical advice.
Directives and regulations set the high level political objectives

Question 2

Level 2 ESMA (1)

Answer 2

Primary role in drafting subordinate acts such as the delegated acts and the implementing acts

Question 3

Regulations are passed by the… (2)

Answer 3

European Commission

European Parliament and Council

Question 4

What does Vertical-direct effect mean? (1)

Answer 4

Companies and EU member states provision of directives are given precedence over national law

Question 5

3 objectives of the Financial Services Action Plan (3)

Answer 5

Single EU wholesale markets
Maintain open and secure retail markets
State of the art prudential rules

Question 6

Regulations are on par with… (1)

Answer 6

national law

Question 7

What powers do the ESMA hold? (4)

Answer 7

Prohibit harmful financial products
Monitor cross border systemic risk
Create technical standards
Resolve disagreements

Question 8

What is the harmonisation of financial services? (1)

Answer 8

To promote a single market between EU member states

Question 9

Level 3 ESMA (1)

Answer 9

Making guidelines and recommendation for supervisory practices

Question 10

Level 4 ESMA (1)

Answer 10

Can be requested to launch investigations and can issue them within 2 months

Question 11

EU member states amend their… (1)

Answer 11

…laws to comply with EU directives

Question 12

What was the FSAP and when was it launched? (1)

Answer 12

The Financial Services Action Plan was a major development in achieving harmonisation and was launched in 1999

Question 13

What is a directive? (1)

Answer 13

Rules addressed to national authorities to be implemented into national law

Question 14

Harmonisation programmes consist of… (1)

Answer 14

Directive under article 58 of the European treaty

Question 15

What were the 3 main failings that caused the global financial crisis in Europe? (3)

Answer 15

Too much risk that wasn’t identified
Supervision was poor
National authorities did not work together

Question 16

Overall aim of ESMA? (1)

Answer 16

To protect and enhance the integrity, efficiency, transparency and orderly European markets

Question 17

What was the ISD? (1)

Answer 17

Investment Services Directive created a single passport, allowing EU member state companies to engage in investment services throughout the EEA

Question 18

When was the ISD taken over by the MiFiD? (1)

Answer 18

2007

Question 19

Why was MiFiD brought in? (1)

Answer 19

To better reflect the financial products in the market

Question 20

What did MiFiD introduce? (3)

Answer 20

widened the range of financial products that could be passported
upgraded advice on personal recommendation
MTFs can be passported

Question 21

What did MiFiD 2 introduce? (4)

Answer 21

A new regulated market, OTF, to regulate the unregulated trades
Strengthening post and pre trade requirements
Limiting size of positions in commodity derivative trades
Avoid disorderly markets from High frequency trading

Question 22

Examples of Ancillary services include: (4)

Answer 22

safekeeping and admin of instruments
lending money to investors to fulfil trades down by them
advice on mergers and undertakings
foreign exchange services

Question 23

Authorisation will not be granted solely for… (1)

Answer 23

…ancillary services

Question 24

What did MiFiR introduce? (1)

Answer 24

Sets out a reporting requirements, but is not implemented into national law

Question 25

What does UCITS Directive stand for? (1)

Answer 25

Undertakings in Collective Investment Transferable Securities Directive

Question 26

For UCITS, the FCA is responsible for… (1)

Answer 26

…Recognising a scheme under UCITS.

Question 27

UCITS III is split into two parts, which are? (2)

Answer 27

Management Directive

Product Directive

Question 28

What is the management directive under UCITS III? (2)

Answer 28

This increase the range of management services that could be passported in the EU.
Including discretionary fund management, safekeeping and fund admin.

Question 29

What is the product directive under UCITS III? (3)

Answer 29

This increased the scope of securities that could be in a UCITS fund, including derivatives
Also increased the limits on SOME instruments
Also set the limit on exposure of funds to 1 company

Question 30

What is UCITS IV and when was it introduced? (6)

Answer 30

Introduced on July 2011
Passport for management companies
Procedure for cross-border fund mergers
Key Investor Information Document (KIID)
Notification procedure for cross border marketing
Strengthening of supervisory cooperation

Question 31

What is UCITS V and when was it introduced? (3)

Answer 31

Introduced on March 2016
UCITS V introduced:
Responsibilities on depositaries
Remuneration policy for UCITS fund managers.

Question 32

What is the AIFM directive?

Scope, objective and date) (4

Answer 32

Implemented in 2013
Alternative Investment Fund Managers Directive covers the admin, management and marketing of AIFs.
The scope of AIFs include, hedge funds, retail investment funds, private equity and investment companies.
Their objective is to regulate the managers not the funds.

Question 33

The AIFMD requires authorisation of the managers with the … if AUM is above … (3)

Answer 33

…home state regulator.

…100m euros when leveraged or 500m euros if not leveraged

Question 34

If an AIF has AUM under 2 thresholds it is deemed as… (2)

Answer 34

…“sub-threshold” and lighter regulations apply

Question 35

A small registered UK AIFM is… (3)

Answer 35

…an internal AIFM of a corporate body
…the unauthorised manager of property funds
…a fund manager who applied to become a VCT or EIS

Question 36

Sub threshold AIFs cannot partake in… (1)

Answer 36

…AIFM Directive