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UK regs and profess integrity > 8 - fin crime > Flashcards

8 - fin crime Flashcards

1
Q

Insider dealing

A

Criminal offence
CJA 1993
Intent + all reasonable doubt
7 years +/ unlim fine

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2
Q

Market abuse

A

Civil
UKMAR and FCA
Can prosecute intent
Only prove effect to balance of prob
unlim fine/restitution/loss of reg status

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3
Q

Misleading statements + impressions

A

FSA 2012
Criminal
intent + beyond reasonable doubt
7 years/ unlim fine

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4
Q

Insider dealing
What actions
what instruments
Covered where

A

dealing on, encouraging others to deal on, disclosure of

shares, DRs
warrants
debts
options, futures CFDs related to above

excluded:
assets w/out 2ndary market
commodities and commodity derivatives
spot and forward FX
insurance prods

covered:
traded on regulated market or via professional intermediary
not directly between 2 people

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5
Q

What is inside info (CJA 1993)

A

Relates to particular securities/issuers
Specific or precise
Has not been made public
Price sensitive

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6
Q

insider dealing defences (7)

A

General
No advantage expected
belief that the information had been widely disclosed
Would have dealt anyway
Did not expect the recipient to deal

Special
Stabilisation
Market information
Market makers in the ordinary course of business

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7
Q

Enforcement on insider dealing law

A

LSE market ops division monitors transaction in vicinity of price sensitive info announcement

FCA with powers from FSMA200
Laws on ID come from CJA 1993

max 7 years +/unlim fine

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8
Q

What are misleading statements + impressions
Punishment?

A

Misleading statements, e.g. lying to persuade someone to deal, concealing
relevant facts in takeover documents, etc.
Misleading impressions, e.g. abusive squeezes, market rigging
- both reckless and deliberate
Misleading statements in relation to benchmarks

Criminal, 7 years +/ unlim fine. FSA2012

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9
Q

Defences for misleading statements/impression
Punishment?

A

Reasonably believed that statement or act was not false or misleading
Acted in conformity with price stabilising rules or control of information rules
(Chinese walls) or share buy-back rules

criminal, 7 years+/unlim fine

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10
Q

2 layers of penalties for misleading statements/impressions

A

1 -summary conviction (magistrates court)= a fine not exceeding the
statutory amount or a jail sentence not exceeding 12 months, or both.
2 - conviction on indictment (crown court) = a jail sentence not exceeding 7
years or a fine, or both.

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11
Q

Market abuse offences + penalites

A

UKMAR
Offences:
Insider dealing (engage, attempt to engage, recommend or induce another to engage, disclose)
- Includes amending and cancelling orders
- A person shall not engage in or attempt to engage in market manipulation

civil - unlim fine, lighter burden of proof, can prosecute intention, + effect based (don’t need motive/intent)

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12
Q

MAR inside info definition

A

Not public
Relates, directly or indirectly, to one or more issuers or to one or more
financial instruments
would have signif effect of prices of financial instrument or related derivative if it were to be made public

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13
Q

UKMAR market manipulation

A

Entering into a transaction, placing an order to trade, or any other
behaviour which
- Gives false signals as to the supply, demand or price of a financial
instrument or related spot commodity contract
- Secures the price of a financial instrument or related spot
commodity contract at an abnormal or artificial level
- Employs a fictitious device or any other form of deception or
contrivance
* Disseminates information through the media, or internet, or any other
means which is likely to give false signals as to the supply, demand or
price of a financial instrument or related spot commodity contract
* Transmits false or misleading information in relation to a benchmark, or
any other behaviour manipulates the calculation of a benchmark

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14
Q

Scope of UKMAR vs criminal offences

A

Wider what : financial instruments (traded on a reg market, OTF and MTF) vs specific instruments
- includes emissions allowances
market manipulation - includes commodity derivatives and commodity spot markets
wider where: applies to instruments wherever abuse occurs vs reg market/professional intermediary
wider who: companies and individuals
lower burden of proof - effect based, balance of prob vs beyond reasonable doubt

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15
Q

FCA guidance on market abuse +sanctions

A

Insider dealing
Improper disclosure
Manipulating transactions
Manipulating devices
Dissemination

sanctions:
- Withdrawal of regulated status
- Financial penalties
- Public statements
- Applying to courts for injunctions and restitution

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16
Q

statutory exemptions from market abuse (safe harbours) - FCA

A
  • Share buy-back programmes and stabilisation measures
  • FCA Rules
  • Takeover Code
  • Market soundings
  • Requires formalised process, including disclosures, notifications of confidentiality and record keeping
  • country specific accepted market practices
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17
Q

FCA market abuse reporting

A

STORs - Suspicious transaction and order reports
- Reporting suspicions from transactions
- must report to the FCA without delay

  • STORs should contain
  • Identity of reporting person submitting STOR
  • Description of the order or transaction
  • Reasons for which market abuse is suspected of the order or transaction
  • Means of identifying any person involved in the order or transaction
  • Any other supporting documents needed by the FCA for investigation
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18
Q

UKMAR requirement to disclose

A

Obligation of issuers to disclose inside info ASAP
Disclosure and Transparency Rules (DTR) used as continuing obligation on
directors of listed companies - FCA handbook

Disclose all price sensitive info via RIS (regulatory info service)
Prevent leakages during negotiations (e.g. via insider list)

19
Q

When does FCA permit delayed disclosure of inside info to public

A
  • It does not mislead the public (i.e. create a false market)
  • Persons receiving the information owe the issuer a duty of confidentiality (control of
    inside information rules apply including insider lists)
  • The company is able to ensure the confidentiality of the information
20
Q

What has to be included on an insider lise

A

Identity of people with access
Reason for inclusion
Date of list creation and updates

21
Q

MAR PDMR rules

A

Persons discharging managerial responsibility (PDMRs) - public companies not just FS
When dealing in own company’s securities

  • must disclose to company and FCA within 3 business days of transaction
  • can’t deal during closed periods (30 days prior to year end or half yearly results)

breach - disciplinary action by FCA against company and/or individual

22
Q

Money laundering control framework

A

Proceeds of crime at 2002
- criminalizes ML, offences and penalties, amended by serious organized crime and police act 2005

The Money Laundering Regulations 2017
- detailed reg with admin provisions for at risk companies, complies with EU directives

Senior management arrangements, systems and controls (SYSC)
- FCA firms only, high level guidance, reference JMLSG guidance

Joint Money Laundering Steering Group guidance
-non-binding guidance on how to implement AML provisions

23
Q

3 stages of ML in PCA2002

A

Placement
- proceeds of any crime placed in bank/building society

Layering
- payments removed from bacnk and excessively traded to cover audit trail (investment firms at risk)

integration
- funds reintroduced to economy to appear to belong to leg sources
(Invesment firms at risk still)

24
Q

Proceeds of crime act 2002 ML offences

A

General - 14 years and/or unlim fine
- Concealing
- Arrangements (assisting)
- Acquiring and/or possessing

  • knowingly prejudicing investigation (5 years and/or unlim fine)

reg sector offences
- Failure to disclose (five years and/or unlimited fine)
- Tipping off (two years and/or unlimited fine

25
Q

MLR 2017

A

Detailed reg of admin procedures to manage ML risk

Risk assessments
- Assessing ML and FT risk for the firm

Policies, controls and procedures to mitigate and manage risk
- Proportionate t
- Appoint a director responsible (‘nominated officer’ usually MLRO)

Reliance
- Must conduct DD on any relied upon party at beginning of arrangement
- Cannot rely upon CDD by firms in high-risk jurisdictions

26
Q

MLR customer due diligence (CDD)

A

Identification procedures
- as soon as reasonably practicable obtainable (proof of person/address)
- for companies - includes ownership and control structure

Enhance CDD - politically exposed personal (have held high offfice in last year), high risk factors (sanctions, high risk country, false docs, unusually complex, high risk bis)

Simplified CPD (base by case; some authorised firms/listed company))

27
Q

When are identification procedures not require MLR2017

A

intro from a UK authorised firm
intro from a person listed in the Money Laundering Directive
(e.g. credit or financial institution in the UK, EU or country with equivalent
money laundering legislation)
Certain transactions worth less than €7,500

28
Q

MLR record keeping and offences

A

5 years from end of relaitonship with client

criminal offences for directors/snr managers - regardless of whether ML occurs
- failure to comply with MLR - 2 years and/or unlim fine
- reckless statements in context of ML - false or misleading - 2 years and/or unlim fund

29
Q

The joint money laundering steering group (JMLSG)

A

Guidance on implementation of MLR2017

-combo of UK trade associations
- Risk-based
Guiding principles
- Customers’ identities verified before acceptance, ongoing verification
- Adequate training of staff
- prompt reporting
Risk mitigation approach
- Summary assessment of money laundering and terrorist financing risk
- specific allocation of responsibilities
- Summary of firm’s procedures
- Summary of firm’s monitoring

30
Q

MLRO and nominated officer

A

often same person
responsible person
POCA, terroisim act and MLR require nom officer
FCA requires MLRO
MLRO reports to NCA

31
Q

NCA - national crime agency

A

Reports to home sec
tackles organised crime, defends UK bordrs etc
lead by senior chief constable

32
Q

Terrorism Act 2000

A

bligation to report suspicions of: (via nom officer - NCA)
* Provision of funds for terrorism
* Use and possession of terrorist funds
* Laundering money which is terrorist property

Failure to report (five years and/or unlimited fine)

33
Q

Counter Terrorism Act 2008 (CTA 08)

A

Extra powers to HMT to impose directions on firms suspected of handling terror funds

  • CDD and monitoring
  • Increasing the identification requirements
  • Systematic reporting
  • HMT can require information without application to the courts
  • Limiting or ceasing business
  • Where the Financial Action Task Force (FATF) requires
  • Where HMT believes there is a significant threat to national interest
34
Q

The Bribery Act 2010 offences and penalties

A

4 offences
- paying bribes
- receiving bribes
(defence: local written law required payment)
- bribery of foreign officials
- failing to prevent bribery
(defence: adequate procedures were in place)

penalties
Individual – ten years jail term and/or unlimited fine
- Company – unlimited fine

35
Q

Bribery prosecutors consider

A

Payment amounts to bribe?
Prosecution in public interest?

36
Q

Bribery Act 2010 adequate procedures

A

Principle-based
1. Proportionate procedure
2. Top-level commitment
3. Risk assessment
4. Due diligence
5. Communication (including training)
6. Monitoring and review

  • Anti-bribery policy
  • Articulates the company’s anti-bribery stance
  • Overview of strat
    -anti-bribery culture
37
Q

The Data Protection Act 2018

A

governs use of personal data
( Data that can or can be used to identify a living individual (a data subject) )
- Applies to data controllers and data processors

38
Q

Principles of data protection

A
  • Processing must be lawful and fair
  • Purposes of processing must be specified, explicit and legitimate
  • Personal data must be adequate, relevant and not excessive
  • Personal data must be accurate and kept up to date
  • Personal data must be kept for no longer than is necessary
  • Personal data must be processed in a secure manner
39
Q

Data controller vs data processor

A

Natural or legal person:

controller: determines the purpose and means of the processing of personal
data.

Processor: processes personal data on behalf of a ‘data controller’.

40
Q

Personal data timeframes

A

MiFID bis - 5 years
non MiFID - 3 years
MLR - 5 years post relationship
Responsibilities info: 6 years

41
Q

Data controllers must provide data subjects with

A
  • Identity and contact details of data controller and data protection officer
  • Purpose
  • The existence of their rights
  • The legal basis for processing
  • Retention period
42
Q

Breach of DPA + penalties

A

Information Commissioner’s Office to be notified without undue delay
* If not within 72 hours, the controller must explain why

Up to 4% of annual group global turnover, or £17.4m, whichever is greater

43
Q

Public Interest Disclosure Act (PIDA) 1998

A

whistleblowing

  • protects right of employee to make a protected disclosure on reasonable belief of a bunch of suspicions
  • whistleblower champion -= FCA requirement under accountability regime, senior manager funsion

UK regs and profess integrity (6 decks)

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