4 - Financial Services Regulation Flashcards
Financial Services and Markets Act 2000
Nature
What is (/isn’t) covered
This act has a very wide scope, covering many different financial products.
Basically everything except NS&I which remain largely unregulated.
Financial Services Act 2012
Nature
Disbanded the FSA and established three replacement bodies:
FPC - BofE committee responsbile for emerging risks to the financial system and strategic direction for the regulatory regime. Secondary objective is supporting economic policy of government.
PRA - Within BofE, responible for stability of strategically important financial institutions.
FCA - Separate independent regulator responsible for conduct of ALL firms and prudential regulation of smaller firms (eg IFAs, insurance brokers).
Bank of England
2 core purposes
- Monetary stability
- Financial stability
Financial Conduct Authority
3 operational objectives
- Consumer Protection
- Integrity of the UK financial system
- Competition
Financial Conduct Authority
8 regulatory principles
- Efficiency and economy
- Proportionality
- Sustainable growth
- Consumer responsibility
- Senior management responsibility
- Recognising the difference in businesses carried on by regulated persons
- Openness and disclosure
- Transparency
Financial Conduct Authority
Additional responsibilities
Along with regulating over 70,000 firms, they are responsible for the:
- FOS
- Money Advice Service
- FSCS
Financial Conduct Authority
5 types of EU legislative acts
Decisions - Individual measures addressed to a citizen of the EU or member state, fully binding on that citizen.
Directives - Desired results binding on member states, who can incorporate them into their own law in their own way (eg MiFID, UCITS directives).
Regulations - Binding on all member states, taking effect immediately. Usually related to day to day administration (eg quotas, prices, external customs duties).
Treaties - EUs primary form of legislation, concern fundamental principles of EU.
Legislation - Secondary (after treaties) combining binding legal instruments (eg regulations) and non-binding (eg recommendations). Made by European institutions in order to carry out their responsibilities under a treaty.
European Supervisory Authorities (ESAs)
Entity they work with
The 3 ESAs
Work with the European Systemic Risk Board (ESRB).
- European Securities and Markets Authority (ESMA)
- European Banking Authority (EBA)
- European Insurance and Occupational Pensions Authority (EIOPA)
Markets in Financial Instruments Directive (MiFID)
Nature
Impact on IFA firms
MiFID is a market harmonisation directive, which places greater emphasis on senior management responsibility.
Many IFA firms only advise on and arrange investments for UK-based customers and don’t hold clients’ money, therefore are ‘Article 3 MiFID exempt firms’.
Insurance Mediation Directive (IMD)
Nature
Insurance related activities covered
Sets minimum common standards across the EU for regulation of sale and administration of insurance.
Covers:
- Introducing, proposing or preparing
- Concluding contracts of insurance
- Assisting in administration and performance of contracts of insurance (eg claims)
Capital Requirements Directive (CRD)
This is the implementation of which framework
Who it impacts
3 pillars
CRD is the implementation of Basel II.
Impacts banks, building societies and some investment firms.
Pillar 1 - Minimum capital requirements.
Pillar 2 - Firms and supervisors taking a view on requirement for additional capital holdings.
Pillar 3 - Improve market discipline through requiring firms to publish certain details or risks, capital and risk management.
Third Money Laundering Directive (3MLD)
Implementation of what?
UK act implementing this directive
Implementation of the revised Financial Action Task Force (FATF) recommendations.
In the UK this is covered by the Money Laundering Regulations Act 2007 (MLR)
Alternative Investment Fund Managers Directive (AIFMD)
Nature
Broad scope with few exceptions, covering management, administration and marketing of alternative investment funds (AIFs).
UK Regulation
Who looks after:
Competition and consumer protection
Consumer Credit
Anti-money Laundering
Competition and consumer protection - Competition and Markets Authority (CMA)
Consumer Credit - FCA
Anti-money laundering - FCA
Pensions Regulator
4 objectives
Powers
- Look after members of all pension schemes
- ensure compliance with pensions law
- reduce risk of Pension Protection Fund (PPF) being used
- limit their impact on employers.
They can prohibit people from being trustees and fine individuals or companies £5k or £50k. Can also get a court order to prevent misuse of assets by a company.
