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UK Financial Regulations > Associated Legislation and Regulation > Flashcards

Associated Legislation and Regulation Flashcards

1
Q

3 actions classified as insider dealing in relation to inside information?

A

Dealing on
Encouraging others to deal on
Disclosure of

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2
Q

What is classified as inside information? (4 things)

A

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

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3
Q

In terms of scope of law on insider info, what does this include?

A

Any financial instrument as defined under MiFID which trades on:
UK/EEA/Gibraltar regulated market, MTF or OTF
NASDAQ/SIX/NYSE

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4
Q

What are excluded investments in relation to insider info? {4pts}

A

Bank accounts
Commodity spot markets
Spot and forward FX
Insurance products

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5
Q

List 4 general defenses of insider dealing

A

Didn’t expect deal to result in profit/avoid loss due to the info
Believed on reasonable grounds that the info was publicly available
Would have acted same way regardless of info
Didn’t expect the recipient to deal

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6
Q

What are 3 special defenses for insider dealing

A

Price stabilisation rules
Market information
Market makers in the ordinary course of business

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7
Q

How can individuals be found guilty of insider dealing - through what?

A

Criminal justice act

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8
Q

Who monitors and who investigates/prosecutes for insider dealing?

A

LSE monitors the market, investigation and prosecution is by FCA

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9
Q

What is max penalty if found guilty for criminal offence of insider dealing and who sentences you

A

10 years prison and/or unlimited fine
Crown court

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10
Q

What is S89 of FSA 2012

A

Misleading statements: lying to persuade someone to deal, concealing relevant facts in takeover docs etc

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11
Q

What is S90 of FSA 2012

A

Misleading impressions: abusive squeezes, market rigging - covers both recklessly created misleading impressions and deliberately created

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12
Q

What is S91 of FSA 2012

A

Misleading statements in relation to benchmarks

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13
Q

Penalty for misleading statements and impressions and who by?

A

10 years prison and/or unlimited fine
Crown court

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14
Q

What are two defences for misleading statements and impressions

A

Reasonably believed statement wasn’t false/misleading
Acting in conformity with price stabilising rules or control of info rules (Chinese walls) or share buy-back rules

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15
Q

UK MAR offences

A

A person shall not engage/attempt to in insider dealing, recommend/induce another person to engage in insider dealing, unlawfully disclose inside info.
A person shall not engage in or attempt to in market manipulation

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16
Q

What type of offence is breaking MAR?

A

Civil offence
Can be subject to unlimited fine

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17
Q

Scope of MAR - in terms of financial instruments?

A

Applies to traded, admitted to trading or for which there is request for admission to trading on a regulated mkt and multilateral trading facility (MTF) or an OTF
Applies to OTC and which have an effect on the price or value of the above.

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18
Q

Scope of MAR - other than for financial instruments?

A

Applies to emissions allowance
For market manipulation - also applies to commodity derivatives and commodity spot markets.

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19
Q

MAR - Code of market conduct list (6 pts)

A

Insider dealing
Improper disclosure
Manipulating transactions
Manipulating devices
Dissemination
Benchmark manipulation

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20
Q

STOR?

A

Suspicious Transaction and Order Report - where market abuse is reported.

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21
Q

Penalties from FCA for breaking MAR?

A

Withdrawal of regulated status, financial penalties, seeking restitution order, obtaining an injunction, issuing public statement of misconduct

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22
Q

MAR - examples of legitimate behaviour or ‘safe harbours’?

A

Share buyback programmes and stablisation measures
FCA rules
Takeover code
Market soundings - requires formalised process (insider list), incl disclosures, notifications of confidentiality and recordkeeping

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23
Q

Timing to report suspicions to STOR?

A

Without delay

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24
Q

What should STORs contain? (5pts)

A

Identity of recording person
Description of order/transaction
Reasons suspected for MAR
Means of identifying person involved in MAR
Any other supporting docs needed by FCA

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25
Q

PMDR?

A

Persons discharging managerial responsibilities (PMDRs)
I.e. employees and directors

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26
Q

Under MAR PMDR regime, what must PMDRs do if they deal in own company shares and what time period?

A

Disclose to both their company and the FCA
Within 3 business days of the transaction

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27
Q

Under MAR PMDR regime, when can PMDRs not deal their own company shares and what time frame?

A

Can’t deal in closed periods
This means 30 days prior to announcement of year-end or half-yearly results

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28
Q

If you breach the MAR PDMR, what type of offence is this?

A

Not criminal
Action taken by FCA against individual or company.

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29
Q

What are the 3 stages of money laundering?

A

Placement - depositing illicit proceeds
Layering - investing in depositing funds
Integration - the surfacing of legitimate proceeds

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30
Q

POCA money laundering - penalty for concealing/acquiring/possessing and arranging (assisting), what type of offence?

A

Criminal
14 years prison and/or unlimited fine

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31
Q

POCA money laundering - penalty for knowingly prejudicing an investigation, what type of offence?

A

5 years, unlimited fine
Criminal offence

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32
Q

In terms of money laundering, what are 4 systems in place to help control this and key features of all?

A

Proceeds of Crime Act 2002 (POCA) - criminalises ML and sets offences/penalties
Money Laundering Regulations 2017 - regs for companies at risk of handling funds for ML + terrorist financing
Senior management arrangements, systems and controls (SYSC) - for authorised firms, rules
Joint Money Laundering Steering Group guidance - not binding

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33
Q

What are three things the ML regs 2017 sets out for firms

A
  1. Risk assessments (for ML/financing terrorism for firm)
  2. Policies/controls to mitigate risk - appointing an MLRO for e.g.
  3. Reliance - conduct DD on any relied-upon party at start of business arrangement and can’t rely on CDD by firms in high-risk jurisdictions - firms have to do it themselves basically
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34
Q

CDD - customer due diligence - who are identification procedures used for and when is this done?

A

Evidence should be obtained as soon as reasonably practicable
For companies - this is info on ownership, control structure e.g. SH’s and senior managers

35
Q

Who does enhanced CDD concern?

A

Politically exposed persons (PEPs)
High-risk factors

36
Q

Who does simplified CDD concern?

A

This is for a firm to decide - on a case by case basis

37
Q

What doe the ML Regs 2017 act set out in terms of record keeping as appropriate length of time?

A

5 years for all records (both business relationship ending or occasional transaction)

38
Q

ML Regs 2017 - what is the proper way to report?

A

Employees report to MLRO
MLRO then reports to National Crime Agency (NCA)

39
Q

For a director/senior manager, what is the penalty and offence charged with if they fail to comply with ML regulations?

A

Criminal offence
2 years and/or unlimited fine
Doesn’t matter if ML occurs or not

40
Q

For a director/senior manager, what is the penalty and offence charged with if they make a statement in context of ML that is false/misleading?

A

Criminal offence
2 years and/or unlimited fine

41
Q

POCA 2002 - what are regulated sector offences and what are the penalties here?

A

This is for financial services only.
Failure to report - 5 years and/or unlimited fine
Tipping off - 2 years and/or unlimited fine

42
Q

JMLSG - define it?

A

Combination of UK trade associations including the BBA (British Bankers Assoc)
Guidance notes how to implement ML regs.

43
Q

What is the purpose of JMLSG?

A

Risk-based approach to implementation of the MLR 2007.
Can provide evidence of due diligence.

44
Q

What does the JMLSG define as politically exposed person (PEP)

A

Individual that has/at any time in preceding year been entrusted with prominent public functions
An immediate family member, or a known close associate of such a person

45
Q

Who is responsibility for the UK sanction regime? (3 pts)

A

HM Treasury
Foreign Commonwealth Office (FCO)
UK Dept for Business Innovation and Skills (BIS)

46
Q

Difference between MLRO and the nominated officer?

A

POCA, Terrorism Act and MLR require a nominated officer.
FCA requires an MLRO.
Generally both roles are performed by the same person and called the MLRO.

47
Q

Who is the National Crime Agency (NCA) led by and who is it accountable to?

A

Led by senior chief constable.
Accountable to the Home Secretary

48
Q

3 pts from the Terrorism Act 2000 and Anti-Terrorism Crime Security Act 2001 and who should this be reported to?

A

Obligation to report suspicions of:
1. Provision of funds for terrorism
2. Use and possession of terrorist funds
3. Laundering money which is terrorist property
Report this to nominated officer.

49
Q

What is penalty for failure to report under Terrorism 2000 and Anti-Terrorism Crime Security 2001?

A

5 years and/or unlimited fine

50
Q

What powers does Counter Terrorism Act 2008 give and to who?

A

Gives extra powers to His Majesty’s Treasury (HMT)
To impose directions on firms suspected of handling funds used in terrorism activities

51
Q

What are the extra powers that the Counter Terrorism Act 2008 include? (3 pts)

A
  1. CDD and monitoring - increasing identification requirements
  2. Systematic reporting - can require info without court application
  3. Limiting/ceasing business - where the Financial Action Task Force (FATF) requires or where HMT believes threat to national interests
52
Q

Bribery Act 2010 - what are the four offences and what section number are they?

A

S1 - paying bribes (offering)
S2 - receiving bribes (soliciting)
S6 - bribery of foreign officials
S7 - failing to prevent bribery

53
Q

What are max penalties from Bribery Act 2010 for individuals and then for the company?

A

Individual - 10 years jail, unlimited fine
Company - unlimited fine

54
Q

Bribery Act 2010 - in bribery of foreign officials, what is the defence made and what is also included as a bribe in this act?

A

Defence is to show that ‘local written law’ required the payment to be made.
Facilitation payments (ie small money to public officials to ensure they perform their duty) are bribes under the Act

55
Q

Bribery Act 2010 - what is defence of failing to prevent bribery and when are firms liable?

A

Firms always liable if fail to prevent person from bribing on their behalf.
Only fully defence may be possible if proof of adequate procedures being in place to prevent bribery shown.
Hospitality isn’t prohibited

56
Q

6 principles of the Data Protection Act 2018

A

Processing - lawful and fair
Purposes of processing - specific, explicit and legit
Personal data - adequate, relevant and not excessive
Personal data - accurate and kept up to date
Personal data - kept for no longer than necessary
Personal data - processed in a secure manner

57
Q

What is defined as personal data?

A

Any data that can or can be used to identify a data subject (individual)

58
Q

Who has the power with regard to the Data Protection Act 2018

A

The information Commissioners Office

59
Q

Penalties under Data Protection Act 2018 (higher penalties)

A

Up to £17.5mn or 4% of global turnover for failure to comply with:
DP principles
Data subjects rights
Transfer of data to 3rd countries

60
Q

Standard penalties under DP Act 2018?

A

Up to £8.7mn or 2% global turnover for other failures e.g. administrative.

61
Q

UK Disclosure rules - when do they require disclosure to the issuer and within what time frame?

A

Within 2 business days when limits:
1. Reach 3%
2. (above 3%) change up or down to the next whole % pt
3. Fall below 3%

62
Q

UK Disclosure rules exceptions - fund managers?

A

When limits:
1. Reach 5%, then 10%, then every % point.

63
Q

UK disclosure rules exceptions - market makers?

A

Exempt from disclosure rules when limits are below 10%

64
Q

UK disclosure rules - what is fully exempt?

A

Custodian and bare nominees
Shares held as collateral

65
Q

What happens after disclosure rules kick in and disclosure occurs to the issuer?

A

Issuer then tells the market

66
Q

What does the Companies Act 2006 S793 Letter require?

A

Requires disclosure of shares held:
At present time
In the last 3 years

67
Q

EU transparency directive stakebuilding disclosure limits?

A

5%, 10%, 15%, 20%, 25%, 30%, 50%, 75%

68
Q

Who administers the UK takeover code?

A

The Takeover Panel (also known as the Panel on Takeovers and Merges, or “PTM”)

69
Q

What does the UK Takeover Code ensure

A

Ensure SHs are treated fairly and not denied the opportunity to decide on benefits of a takeover

70
Q

What is the UK takeover code not related to?

A

Not related to financial or commercial adv/disadv
Not related to Competition policy
These things are to do with the CMA

71
Q

What are the 6 general principles of the Takeover Code

A

All SHs given equal treatment and protected
SHs are given sufficient time and info to decide
Board of target to act in best interest of company as a whole
False markets must not be created (disclosure)
Predator to make a bid only after ensuring they can meet cash requirements of bid
Target co. not to be hindered in business affairs for longer than necessary

72
Q

Trade report: why, who, when, to whom?

A

For MiFID post-trade transparency,
Done by senior selling firm.
Is automatic or within 3 minutes
Is to the exchange

73
Q

Transaction report: why, who, when, to whom?

A

For market surveillance
Done by both counterparties
Done by T+41
Is to the regulator via approved reporting mechanisms e.g. UnaVista and TRAX

74
Q

List 3 other reportable transactions?

A

European Markets Infrastructure Regulation (EMIR) - for OTC derivs
Short Selling Regulations (SSR)
Securities Financing Transaction Regulation - specific disclosure for rehypothecated assets

75
Q

EMIR - what are the obligations on reporting - to whom and who does it apply to?

A

All derivative contracts must be reported to to a trade repository
Applies to both financial and non-financial counterparties

76
Q

SSR - what type of disclosure is this?

A

Could be private or public disclosure - depends on size

77
Q

Securities Financing transaction Regulation - to whom, what and applies to who?

A

Must be reported to trade repository
Specific disclosure for rehypothecated assets - those that have been posted as collateral by their clients
Applies to financial counterparties only in the UK

78
Q

Capital Requirements Directive - what framework does it implement?

A

Basel Framework

79
Q

What are 3 pillars of Capital Requirements Direct

A
  1. Min capital requirements for credit, market and operational risk
  2. Supervisory review - discussion w regulator on whether addit. capital should be held
  3. Disclosure of risk and risk mgmt to improve mkt discipline
80
Q

What is Principles for Business 4?

A

Financial prudence
The capital resources of an authorised firm must always be greater than the capital adequacy requirement set by the FCA/PRA)

81
Q

Breaches of statutory duty - FSMA 2000 - what is Section 56?

A

FCA makes a prohibition order if individual is no longer fit and proper

82
Q

Breaches of statutory duty - FSMA 2000 - what is Section 59?

A

Authorised firm must take reasonable care to ensure that no person performs a controlled function unless approved by the FCA

83
Q

Breaches of statutory duty - FSMA 2000 - what is Section 71?

A

Private person may sue an authorised firm for losses resulting from the employment of a prohibited person

84
Q

Breaches of statutory duty - FSMA 2000 - what is Section 138D (FSA2012)

A

Any person may sue an authorised firm for losses resulting from a breach by the firm of the FCA rules.
Financial loss has to have been suffered.

UK Financial Regulations (6 decks)

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