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UK Financial Regulation > Associated Legislation and Regulation > Flashcards

Associated Legislation and Regulation Flashcards

1
Q

capital requirements directive (CRD) CRD 4 / Basel 3

A

make sure banks have adequate capital and managing risks appropriate

pillar 1
capital requirements for credit, market and operational risk

pillar 2
supervisory review - discussion with regulator on whether additional capital should be held

pillar 3
disclosure of risks and risk management to improve market discipline

pillar 4
financial prudence (capital resources of authorised firm > capital adequacy requirement set by FCA)
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2
Q

what is the process of being convicted for misleading statements and impressions

A

S89-91 FSA 2012 -> criminal offence -> intent -> beyond all reasonable doubt -> 7 years and/or unlimited fine

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3
Q

what is the objective test for money laundering

A

ought to have had a suspicion, would a reasonable person have reasonably been expected to identify that as a suspicious transaction

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4
Q

what is S52 of the criminal justice act

A

criminal offence to deal on, encouraging others to deal on, disclosure of inside information:
relates to particular securities or issuers
specific or precise
has not been made public
price sensitive

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5
Q

what does a german firm that has obtained a license to sell securities in germany need to do if it wants to sell securities in UK

A

notify relevant home regulator, and if granted permission to do so, can passport their services to other EEA member states

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6
Q

what are some defences against misleading statements and impressions

A

reasonably believed statement or act not false or misleading

acted in conformity with price stabilising rules or control of information rules (chinese wall) or share buyback rules

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7
Q

what is the bribery act 2010

A

major piece of anti-corruption legislation

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8
Q

what is a STOR

A

suspicious transaction and order reports (STORs)

-reporting suspicions to the FCA without delay

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9
Q

what is the definition of a collective investment scheme (CIS)

A

open-ended mutual funds

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10
Q

what are the general offences of money laundering

A

concealing
arrangements (assisting)
acquiring and/or possessing

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11
Q

money laundering regulations 2017

A

detailed regulation setting out administrative provisions for companies at risk of handling funds for money laundering (all firms, car dealers, estate agents)

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12
Q

when was mifid created

A

2007, updated on January 3 2018

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13
Q

mifid || (don’t worry too much about this)

A

many more trading venues, participants and products brought into scope,
electronic trading
-Organised trading facilities (OTF)
transparency of markets
-expanding beyond equity to bonds and derivatives
investor protection
-banning monetary inducements by certain firms
product intervention
-national regulators can permanently ban products
-position limits for products, such as commodity derivatives

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14
Q

who enforces insider dealing

A

LSE market operations division monitors transactions,

FCA prosecutes

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15
Q

what are the six 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
data must be accurate and kept up to date
data must not be kept for any longer than is necessary
data must be processed in a secure manner

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16
Q

what can be the punishment for knowingly prejudicing an investigation (money laundering)

A

five years and/or unlimited fine

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17
Q

what are SYSC with regards to money laundering

A

high level rules and guidance for authorised firms

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18
Q

what is the maximum penalty for misleading statements and impressions under S89-91 FSA 2012 in the magistrates court and the crown court

A

magistrates court: six months imprisonment and/or £5,000 fine
crown court: seven years and/or unlimited fine

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19
Q

what part of the law is insider dealing prosecutable under

A

S52 criminal justice act 1993

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20
Q

switzerland mifid

A

no (haven’t signed up), turkey no either

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21
Q

NCA

A

national crime agency

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22
Q

what is the legislation regarding the funding of terrorism

A

terrorism act 2000 and anti-terrorism crime security act 2001

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23
Q

what powers does the counter terrorism act 2008 give HMT

A

customer due diligence and monitoring
systematic reporting
limiting or ceasing business

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24
Q

what is triggered at 30% ownership of company

A

mandatory takeover bid, shareholder has to offer to buy all remaining shares, said to have effective control over business, can block resolutions and general meetings

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25
Q

POCA

A

proceeds of crime agency

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26
Q

what are open ended investment companies (OEICs) now referred to by the FCA as

A

investment companies with variable capital (ICVCs)

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27
Q

what are legitimate ways to behave in relation to market manipulation

A

share buy-back programmes and stabilisation measures
FCA rules
takeover code
market soundings
accepted market practices (country-specific)

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28
Q

what does data protection act 2018 do

A

make GDPR legally binding across united kingdom

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29
Q

what is the scope of mifid

A 
core activities:
reception and transmission of orders
execution of orders
portfolio management
investment advice
underwriting and placing
operating an MTF or OTF

ancillary services include:
safekeeping and administration
loans to carry out transactions
investment research and financial analysis

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30
Q

what are the penalties of a breach in MAR

A

civil in the UK

  • lighter burden of proof
  • effect-based
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31
Q

what are the provisions of EMIR (european markets infrastructure regulation)

A

all OTC derivatives trades to be reported to trade repository,
all financial and non-financial counterparties to adequately manage risk of contract
-reconciliations
-collateral
requirements to use a central counterparty where mandatory clearing is in effect (some contracts)

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32
Q

what is the risk-based approach guiding principles of the joint money laundering steering group (JMLSG)

A

customers’ identities verified before acceptance
knowing customer on ongoing basis
adequate training of staff
recognition of importance of prompt reporting

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33
Q

when is the data protection act and what is it a result of

A

2018, GDPR (general data protection regulation)

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34
Q

how would a regulated collective investment scheme become available to be marketed in EEA

A

apply to FCA to seek UCITS (undertaking for collective investments in transferable securities) status
such schemes can then be marketed throughout EEA

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35
Q

can companies be guilty under insider dealing legislation of criminal justice act

A

no, only individuals can be guilty of this offence

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36
Q

what are the offences under EU Market Abuse Regulation (MAR)

A

a person shall not:
-engage or attempt to engage in insider dealing (includes amend or cancel)
-recommend or induce another person to engage in insider dealing
-unlawfully disclose inside information
a person shall not engage or attempt to engage in market manipulation

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37
Q

what are examples of a misleading impression under S90 FSA 2012:

A

abusive squeezes, market rigging

-covers recklessly created misleading impressions and deliberately created misleading impressions

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38
Q

who is the responsible for what under respective regulators in mifid, who is regulator, home or host

A

home state regulator is pretty much everything

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39
Q

when someone build up significant stake in business, other shareholders have right to know, what are the disclosure thresholds as outlined by the EU transparency directive

A

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

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40
Q

what is the punishment for money laundering general offences

A

14 years and/or unlimited fine

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41
Q

what is the punishment for the failure to report terrorist financing

A

five years and/or unlimited fine

42
Q

what are the maximum penalties for individuals under bribery act 2010

A

ten years jail term and / or unlimited fine

43
Q

do POCA, the terrorism act and MLR require a nominated officer

A

yes

44
Q

how to differentiate funds for money laundering and terrorism

A

if funds from legitimate source then cannot be ML

45
Q

is it insider trading if the insider obtained information but did not know it was price sensitive

A

no, the insider must knowingly have inside information. If there is no intent, there is no offence

46
Q

what is the host state regulator responsible for under mifid

A

conduct of business in host state when performed from branch in host state (for mifid business these rules should be the same)
any other rules required by host state (eg in UK, SMCR)

47
Q

what are the four criminal offences defined under the bribery act 2010

A 
paying bribes
receiving bribes
bribery of foreign officials
-defence to show 'local written law' required the payment to be made (not local custom)
failing to prevent bribery
48
Q

what is the regulation regarding managers’ transactions

A

persons discharging managerial responsibility (PDMRs) (i.e. employees and directors) dealing in own company’s shares must disclose to both their company, and the FCA, within three business days of the transaction
-PDMRs must not deal during closed periods (year-end or half-yearly results: 30 days prior)

49
Q

what are the maximum penalties for companies under bribery act 2010

A

unlimited fine

50
Q

what happens when shareholder owns majority (>50%)

A

become legal owner of company, if holding company acquire then becomes member of holding companies group

51
Q

what should STORs contain and what is a stor

A

suspicious transaction and order reports (STORs)

identify of reporting person submitting STOR
description of order or transaction
reasons for which market abuse suspected
means of identifying any person involved in order
other supporting documents needed by the FCA for investigation

52
Q

who can be guilty of general offences of money laundering

A

anyone

53
Q

what are example of a misleading statement under S89 FSA 2012:

A

lying to persuade someone to deal, concealing relevant facts in takeover document etc

54
Q

what is the joint money laundering steering group

A

(JMLSG), combination of UK trade associations including BBA which provide guidance on how to implement the money laundering regulations

55
Q

what are regulator sanctions of breaching market abuse regulation as defined by FCA market conduct handbook

A

withdrawal of regulated status
financial penalties
public statements
applying to courts for injunctions and restitution

56
Q

what is the maximum penalty for being convicted of insider dealing if you have been prosecuted in the criminal courts

A

7 years prison and/or unlimited fine

57
Q

what is the EEA

A

European Economic Area = 28 EU + Norway + Iceland + Liechtenstein

58
Q

what is EMIR

A

european markets infrastructure regulation,

regulation of derivatives, central counterparties and trade repositories

59
Q

what is the takeover code

A

ensure shareholders affected by takeover bids are treated fairly and not denied opportunity to decide on the benefits of the takeover

  • not to do with financial or commercial advantages of takeover (for investors to decide themselves)
  • not to do with competition policy (assume CMA already approved)
60
Q

what is the financial prudence principle for business 4

A

capital resources of an authorised firm > capital adequacy requirement (set by FCA)

61
Q

what are the special defences of insider dealing

A

stabilisation (artificial support of newly issued shares by issuing house),
market information (information one would reasonably expect participants to deal on, for ex, predator company buying shares in target before takeover announced),
MM dealing in ordinary course of business

62
Q

does a breach of MAR PDMR (persons discharging managerial responsibility) regime constitute a criminal offence (selling shares in own company without reporting)

A

no, disciplinary action would be taken by FCA against individual or company

63
Q

MLR

A

money laundering regulations

64
Q

what are the regulations of UCITS (undertaking for collective investments in transferable securities) funds

A

product directive allows:
transferable securities
-max of 10% NAV of fund to any single issuer
money market instruments
other UCITS funds
-fund of funds
bank deposits (max 20% NAV in single institution)
financial derivatives
index tracker funds
borrowing restrictions (max 10% NAV -> short term borrowing)

(basically just need to learn what they can’t invest in (other card))

65
Q

mifid instruments are typically ______ instruments

A

traded

66
Q

what is the counter terrorism act 2008

A

gives extra powers to HM treasury (HMT) to impose directions on firms suspected of handling funds to be used for terrorist activities

67
Q

if you’re the trustee or manager of a collective investment scheme then what do you need to be

A

authorised

68
Q

what is CDD

A

customer due diligence

69
Q

what happens when shareholder gets 75% ownership in company

A

can de-list

70
Q

what defines market abuse under FCA market conduct handbook guidance

A 
insider dealing
improper disclosure
manipulating transactions
manipulating devices
dissemination
benchmark manipulation
71
Q

what is the risk mitigation approach of the joint money laundering steering group (JMLSG)

A

summary assessment of ML and TF risks
allocation of responsibilities
summary of firm’s procedures
summary of firm’s monitoring

72
Q

what does the companies act 2006 S793 require

A

allows company to require any shareholder who they expect to own shares to disclose their share holdings to the company

73
Q

what are the six general principles of the takeover code

A

shareholders given equal treatment and protected
shareholders given sufficient time and information to deicide
board of target act in best interests of company as a whole
false markets must not be created
predator only make bid after ensure can meet all cash requirements of bid
target company not hindered in its business for any longer than is necessary

74
Q

what does MAR define ‘market manipulation’ as

A

entering into transaction which:
-gives false signals
-secures price of an instrument at an abnormal level
-employs a fictitious device
disseminates information likely to give false signals
transmits false or misleading information in relation to a benchmark

75
Q

what are the specific regulated sector offences for money laundering (only people in banking sector can be punishable)

A 
failure to report (five years and/or unlimited fine)
tipping off (two years and/or unlimited fine)
76
Q

what is inside information as defined by S52 criminal justice act 1993

A

relates to particular securities or issuers
specific or precise
has not been made public
price sensitive

77
Q

what are the general defences of insider dealing

A

didn’t expect deal to result in profit due to info,
believed on reasonable grounds that information public,
would have acted in same way regardless of possessing information,
did not expect recipient to deal

78
Q

what is an MLRO

A

nominated officer

money laundering reporting officer

79
Q

which instruments does mifid cover

A

transferable securities
units in collective investment scheme
money market instruments
derivatives on securities, currencies, interest rates or yields,
commodity derivatives (only on MTF or OTF),
credit derivatives,
financial CFD (only financial spread bets and CFDs (diff from spec inv)
exotic derivatives (weather, carbon)

same as derivatives under specified investments

80
Q

is an investment trust company considered a collective investment scheme by the FCA

A

no

81
Q

what is aim of mifid

A

harmonised rules within economic area, allow firms in EEA to open branches and cross-border sell throughout EEA without need for license (passporting)

82
Q

what is the difference between passporting services for mifid for core and ancillary services

A

core activities can be passported on their own, ancillary services cannot be passported on their own,
can passport ancillary with core

83
Q

what is the definition of proceeds of crime

A

any proceeds from an act considered a crime in the UK

84
Q

what is the process of getting convicted for insider dealing as a criminal offence

A

S52 criminal justice act 1993 -> criminal offence -> intent -> beyond all reasonable doubt -> seven years and/or unlimited fine

85
Q

what is the timeline for money laundering defined under the proceeds of crime act 2002

A

PLACEMENT (proceeds placed in bank) -> LAYERING (payments taken from bank used to buy different investments) -> INTEGRATION (money appears as legitimate source)

86
Q

what is the process of being convicted for market abuse

A

EU MAR & FCA sourcebook -> civil offence -> effect -> balance of probability -> unlimited fine

87
Q

what is the main piece of legislation that criminalises money laundering

A

proceeds of crime act 2002, criminalises and sets out offences and penalties

88
Q

what is special about the bribery act 2010

A

transnational application: breach of UK law to pay bribe anywhere on planet as long as person accused of paying bribe has what law calls close connection to UK

89
Q

what defines inside information under MAR

A

information of a precise nature that:

  • has not been made public
  • relates, directly or indirectly, to one or more issuers or to one or more financial instruments; and
  • if it were made public, would likely have a significant effect on price of those financial instruments or related derivatives
90
Q

what is an example of misleading statements under S91 FSA 2012:

A

misleading statements in relation to benchmarks eg LIBOR

91
Q

what is the same for both UK and EU disclosure rules

A

30% mandatory takeover bid
50% legal owner
75% can now delist

92
Q

what is the money laundering regulations 2017 (MLR 2017)

A

risk assessments

customer due diligence

reliance
-cannot rely on CDD by firms in high-risk jurisdictions

education and training for employees

recordkeeping (5 years)

criminal offences for directors/senior managers (2yr and/or unlim fine)

93
Q

what is the scope of MAR

A

applied to financial instruments
-traded, MTF and OTF, OTC
applies to emissions allowance,
for the offence of market manipulation, also applies to commodity derivatives and commodity spot markets

94
Q

what can UCITS (undertaking for collective investments in transferable securities) funds not invest in

A

commodity derivatives and property or any other tangible product

95
Q

what is the maximum penalty for insider dealing

A

7 years and/or unlimited fine

96
Q

what does S89-91 FSA 2012 cover

A

misleading statements and impressions

97
Q

what is difference between EU and UK disclosure rules

A

within two business days,
reach 3%
(above 3%) change up or down to the next whole % point
fall below 3%
fund managers - at 5%, 10% then every % point
market makers exempt below 10%

98
Q

what is the alternative investment fund managers directive (AIFMD)

A

aims to regulate (hedge) fund manager not the funds
will allow cross border (EEA) selling of funds by either
-being authorised by regulator in EU
-outside EU if meet certain fiscal and regulatory requirements

99
Q

what investments are excluded from insider dealing

A

assets with no secondary market
commodities and commodity derivatives
spot and forward FX
insurance products

100
Q

what is it that gives the FCA the power to prosecute insider dealing offences (acc q)

A

FSMA 200,

the offence is contained within the CJA 1993, however the ability of the FCA to prosecute comes from FSMA 2000

UK Financial Regulation (7 decks)

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