Chapter 1 Flashcards
1
Q
What is the role of a financial market
A
It is concerned with the raising and grading of capital
2
Q
How can an individual lend
A
Conscious or unconscious
3
Q
What is conscious savings
A
Depositing cash into a bank account
4
Q
What is unconscious saving
A
When individuals employ the services of fund managers and pay premiums into insurance and pension companies
5
Q
What is the public sector net cash requirement
A
The cash needed by governments to make up the shortfall on their spending on public services
6
Q
What is a retail market
A
Involves a private individual / client
E.g. retail banking, general and life insurance and CIS
7
Q
What is a wholesale market
A
Institutional clients such as pension funds, charities and insurance companies
8
Q
What are the activities that investment banks undertake
A
Trading as principle
Broking
Market making
Research
Corporate finance
Mergers and acquisitions
Fund management
9
Q
Retail banks activities
A
Providing a high street services
primarily accepting deposits and giving loans
10
Q
Building societies activities
A
Similar to retail banks but a different legal structure
Jointly owned by all of their savers and borrowers
11
Q
General insurance covers what
A
Motor accidents, fires etc
12
Q
Life insurance provides what
A
Investments vehicles that pay out on death
13
Q
What do fund managers do
A
Provide wealth management services to a range of clients
Construct and manage portfolios on behalf of institutional clients
14
Q
Stock broker activities
A
Trade in investments on behalf of their clients
15
Q
What are the different investment distribution channels
A
Direct investment
Financial advisor
Independent financial advisor
Appointed representative
16
Q
What is an appointed representative
A
Someone who is tied to a particular provider and so can only give advice on the providers services
17
Q
What is an independent financial advisor
A
Someone who is permitted to give advice on any product in the market
18
Q
What is the governments role in financial markets
A
The provide consumer protection and to combat financial crime
They also have a role of creating economic stability and promoting growth
19
Q
Goal of governments economic and industrial policy
A
Goal of creating low unemployment and interest rates
20
Q
Government bench mark inflation
A
2%
21
Q
What did the FSMA 2000 aim to do
A
Empower the FCA and the PRA to be the regulators of the UK financial market
It aims to create the framework for regulation in the UK financial services industry
22
Q
What are the 4 objectives set out in the FSA 2012
A
Ensure relevant markets work well
Consumer protection
Integrity of UK financial system
Competition
23
Q
What is the UK known by the EU as
A
A third country
24
Q
What is the temporary permissions regime
A
Allows EEA financial services to passport to continue to operate in the UK
25
What is the lamfalussy approach
It is a 4 level procedure that speeds up the legislative process
26
What is the European Commission responsible for
The implementation, management and control of common policies adopted by the European council
27
What are the three European supervisory authorities
The European securities and markets authority
The European banking authority
The European insurance and occupational pensions authority
28
What is the role of the ESMA
It’s mission is to enhance investor protection and promote stable and orderly financial markets
29
What is the aESMA made up of
The regulators of securities markets throughout the EU
30
What is a competent authority
The regulators on the ESMA committees
31
What does the ESMA say about supervision
Supervision is carried out by the national supervisory authorities
32
What are the 3 objectives of the ESMA
Investor protection
Orderly markets
Financial stability
33
How does the ESMA achieve its 3 objectives
Promoting supervisory convergence
Assessing risks to investors, markets and financial stability
Completing a single rule book for EU financial markets
Directly supervising financial entities
34
Level 1 ESMA power
Giving technical advice to the European Commission when developing legislative products
35
Level 2 ESMA power
Drafting subordinate acts
36
What forms can subordinate Acts take
Delegating acts - setting out details needed to comply with laws
Implementing acts - setting out processes required to implement the laws in member states
37
Level 3 ESMA power
Developing guidelines and recommendations
I.e. overseeing a consistent approach to the implementation and enforcement of EU legislation
38
Level 4 ESMA power
ESMA can launch investigation into a concern and address a relevant national authority within 2 months
39
What is the role of the European Systematic Risk Board
To minute the entire financial sector to identify potential problems
40
What is the financial services action plan
It consists of EU directives and legislation
It wants to create a single EH wholesale markets, open and secure retail markets and state of the art prudential rules
41
What is an EU regulation
EU laws
As soon at they are passed they have binding legal force throughout every member state
42
What is an Eu directive
They have to be addressed by national authorities who then must take action to make them part of legal law
43
What was the single regulator for the UK financial services industry
The FSA
Financial services authority
It was overhauled in the FSA 2012 act to be broken up
44
What are the more specialized regulators created by the FSA 2012
The Financial Policy Committee
The prudential regulation authority
The financial conduct authority
45
Who runs the FPC
The Bank of England
46
Who runs the PRA
The Bank of England
47
Who funds the FCA
It levies upon regulated firms
48
Who is the PRA responsible for
Financial companies that manage significant risks in their balance sheets
I.e.
banks
Building societies
Insurers
Credit unions
49
Who is the payment systems regulator
It is a subsidiary of the FCA
But is an independent body with its own head and board
50
What is the aim of the payment streams regulator
To make payment streams work well for those who use them
51
What is a payment steam
Where you pay for something in a series of payments
52
What are the statutory objectors of the PSR
To ensure payment streams are operated and developed in a way that considers the interest of consumers
To promote effective competition
To promote developments and innovations in payment streams
53
What are the powers of the PSR
Set standards
Impose rules
Carry out investigations
Act alongside the CMA to rectify anti competitive behavior
54
What is the financial policy committee
Established within the Bank of England and is responsible for macro prudential regulation
55
Who does the financial policy committee include
Governor of the BoE acting as chair
3 deputy BoE governors
2 BoE directors
Chairman of the FCA
4 non bank members
A non voting member of the treasury
56
What is the role of the FPC
To assist the BoE to achieve its objective of financial stability and to take enhancing growth into account when making decisions
57
Who is the financial ombudsman service
The system for the consideration of complaints against its firms by customers when a customer is not satisfied with a companies management of their complaints
58
What can the FOS make rewards for
Financial loss, pain and suffering
Damage to reputation
Inconvenience
59
What is the FCS
Financial compensation scheme
They provide compensation to firms what a an authorized person are unable to satisfy claims due to insolvency
60
Who oversees the FCS
Jointly overseen by the FCA and the PRA
61
What is the Tax and Chnacery chamber of the upper tribunal
It is an independent body run by the ministry of justice that firms go to when they are unhappy with a decision made by the FCA or the PRA
62
What happens if a company doesn’t agree with the decision made by TCCUT
It can be appealed in the court of appeal and then the Supreme Court of law but only when it relates to a point of law
63
Who decides the setting of interest rates by the BoE
The banks monetary policy committee
64
Who often do the MPC meet? And why?
The banks monetary policy committee
They meet on a monthly basis to set rates in order to meet the governments inflation target
65
Who sets the yearly inflation target
The chancellor of the exchequer
66
What is the basic principle of data protection
The public should know or should be able to find out who is carrying out the processing of personal data and for what purposes
67
What is the GDPR
It places on obligation on data controllers and data processors to register with the information commissioner
68
What can the commissioner do if a breach of GDPR occurs
Enter premises and seize documentation without a warrant
Issue enforcement notices
Instigate criminal proceedings
69
What are the 6 data processing principles
Ensure personal data is
- processed lawfully, fairly and transparently
- collected and use for its specified use
- adequate and limited to what is necessary
- accurate and up to date
- kept in a form which does not allow identification for longer then necessary
- processed in a manner which ensures appropriate security of personal data
70
What is a data processing notification
Data controllers must notify the relevant authority before carrying out data processing
71
What is the personal data breach notification
Organizations in the UK must notify the ICO within 72 hours of a breach
Or without delay in a high risk situation
72
Who considers an application for dual regulated firms
The FCA looks and gives consent or does not then the PRA considers this and acts
73
What are the 3 objectives for the FCA
- securing appropriate degree of protection for consumers
- protecting and enhancing the integrity of the UK financial system
- promoting effective competition in the interests of consumers
74
What are the general powers of the FCA
Authorization
Supervision
Enforcement
Sanctions and disciplinary action
Rule making
75
What does the FCA handbook do
It grants the FCA power to make rules
76
What is the structure of the FCA handbook
Divided into 7 main blocks which each deal with a different aspect of regulation
77
What are the 7 main blocks of the FCA handbook
1. High level standards
2. Prudential standards
3. Business standards
4. Regulatory process
5. Redress
6. Specialist sourcebooks
7. Listing, prospectus and disclosure
78
What is the Temporary product intervention rules
They give the power to the FCA to make a rule without delay
79
How long can a TPIRS last
12 months
80
When can a TPIRS be used
In a product that
- would be acceptable if certain features were excluded
- where there is significant incentive for indiscriminate charging of individuals
- markets where the firm restricts product range to reduce consumer choice or competition
- product which would bring significant detriment
- product that is inherently flawed
81
What is the firm systematic framework
It is a supervisory tool used by the FCA
82
What are the features of the firm systematic framework
Governance and culture - assess effectiveness of firm
Product design - determine whether product meets needs
Sales or transaction process
Post sales handling - how it handles complaints
Business model - how to treats consumers and where future risks may lie
83
What are the 2 types of firms categorized by the FCA
Fixed portfolio and flexible portfolio
84
What is a fixed portfolio firm
Larger firms who pose a greater risk to the FCAs statutory objectives
They will have a dedicated FCA supervisor
85
Flexible portfolio firm supervision
Supervised through issues and products objectives
86
How is direct supervision carried out by the FCA for fixed portfolio firms
By supervision visits for FCA enforcement officers
87
What can FCA enforcement officers do
Demand the production of documents and can take copies
Demand that any employee makes themselves available for an interview
Demand that the meetings take place of the firm or at the FCA
88
Cooperation with the FCA by firms rules
It is a criminal off me to not cooperate with the FCA or to provide misleading info
89
What does the Regulatory Decisions Comittee do
They normally deal with the more significant matters in the disciplinary process in the FCA
90
RDCs relationship to the FCA
Is it accountable to the board of the FCA but it is operationally independent
91
Who are the members of the RDC
There is only one FCA employee who is the chair
92
How will the RDC notify someone that they are under investigation
Through the issuance of a statutory notice
93
What are the 3 types of statutory notice
Warning - provides details of actions proposed
Decision - details of disciplinary actions
Further decision - an amendment to decision
94
When can a further decisions notice be issued
Only with the firms consent
95
What is a final notice
Sets out the terms of the final actions that the regulator has decided to take
96
What is the regulated activities order 2001
It is a secondary legislation to the FSMA 2000
97
What are excluded activities
Investment advice in newspapers
Television broadcasts
Bloomberg info etc
Trustees, nominees and representatives that don’t receive remuneration
Trading on one’s own account
Dealing in contracts in the foreign exchange
Operating an employee share scheme
98
What are excluded investments
Physical property
Currencies and transactions in currencies
Premium bonds
National savings certificates
99
What is max criminal penalty for carrying out regulated activities without being regulated
2 years and an unlimited fine
100
What is a voidable contract
A contract entered into where there has been a breach of general prohibition
101
What can an investor do when there is a voidable contract
Enforce the contract and sue for damages if there is a loss
Void the contract and get money back
102
Where does the FCA get the power to perform their regulatory role
From the FSMA 2000
103
Who regulates banks in the UK
The PRA which means that the BOE regulates itself
104
Who regulates foreign exchange market in the UK
The FCA
105
Is a deposit regulated or not
Unregulated
106
Who is the garantor of the FCA
The treasury
107
Is the FCA private or public
Private
108
What is included in Block1 high level standards
Senior management arrangement SYSC
Statement of principles for businesses
PRIN
Min standards for becoming authorized COND
Training and competence rules TC
SIP and code of practice for approved individuals APER
Code of conduct for staff COCO
Fit and proper criteria FIT
109
What is in Block 3 business standards
Conduct of business rules COB
Code of market conduct MAR
Requirements relating to client assets and money CASS
110
Are activities performed for commercial activities regulated or non
Non regulated
111
Are futures for risk management regulated or non regulated
Non regulated
Risk mangement is exempt
112
When is a statutory notice required
On the imposition of a financial penalty onto a firm
113
What do regulated activities include
Dealing, arranging, managing, advising, safeguarding and admin - all of investments
Operating a CIS
114
Is advice given to an intermediary regulated
Non regulated
115
What is the role of the government
The provision of services firms are not willing to provide
Regulation of firms for the consumer
To intervene in the distribution of income by private market transactions
Stabilization of the economy
116
Does the FCA have the power to impose a custodial sentence
No, it must go to the court and persuade them to do so
117
What are the 3 European Supervisory Authorities
ESMA
European Banking Authority
European Insurance and Occupational pensions authority
118
When managing investments what must a person do according to FSMA 2000
Exercise discretion
119
Who operates the TCCUT
It is a government department as it is run by the ministry of justice
120
Does the ESMA supervise regulatory firms
No
It works as setting high libel standard and leaves day to day supervision to the national supervisory authorities
121
Who does the COLL sourcebook apply to
IVCVs and managers of authorized unit trusts
122
What is the general prohibition
It states that it is illegal to carry on investment business without authorisation or exemption
123
What is a defence if you breach the general prohibition
To show that you took all reasonable precautions to avoid committing the offense or that you excercised due diligence
124
Is providing investment services to another member of your group regulated or non
Non as it counts as trading on one’s own account
125
Is a loss adjuster an exempt investment
Yes
126
who is in charge of regulating financial stability in the UK
the BoE
127
who sets the statutory objectives for the BoE and the treasury
parliament
128
what are the key risks of the financial policy comittee
systematic risks
129
who is the FCA accountable to
the HM treasury
130
who are fund managers regulated by
FCA
PRA if they are very big
131
who appoints the FCA board
the treasury
132
who is the FOS accountable to
the FCA
133
what are the general powers of the FCA
grant part 4a permission, approve individuals
rule making
prosecuting for financial crimes
supervision, enforcement, disciplinary actions
134
which powers can the FCA / PRA delegate?
powers of investigation
135
who is the RDC
an independent committee who makes the law decisions
136
what disciplinary powers does the FCA have
withdrawal of approval
prohibition
restitution order - i.e. make good
public statement of misconduct
prosecution - take to court
137
how should a firm given part 4a permission be described
authorsied
138
how should a firm given part 4a permission be described
authorised
139
what is the S56 prohibition order
it is the greatest punishment that the FCA can give to an individual
no jail but a fine without court
140
what are the excluded regulated activities
newspapers
television broadcasts
unpaid trustees e.g. nominees / executors
employee share schemes
dealing as a principle and end user
commercial
141
what are the excluded investments
property
tangible assets (incl options and futures on)
currencies
premium bonds
national savings certificates
142
if an individual is responsible for breaking the general prohibition which court should you go to
the crown court
143
are options on precious metals regulated
yes
144
are options on currency regulated
yes
145
who does the COLL handbook apply to
IVCVS
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