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IMC Unit 1 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is the role of a financial market

A

It is concerned with the raising and grading of capital

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2
Q

How can an individual lend

A

Conscious or unconscious

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3
Q

What is conscious savings

A

Depositing cash into a bank account

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4
Q

What is unconscious saving

A

When individuals employ the services of fund managers and pay premiums into insurance and pension companies

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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

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6
Q

What is a retail market

A

Involves a private individual / client
E.g. retail banking, general and life insurance and CIS

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7
Q

What is a wholesale market

A

Institutional clients such as pension funds, charities and insurance companies

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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

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9
Q

Retail banks activities

A

Providing a high street services
primarily accepting deposits and giving loans

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10
Q

Building societies activities

A

Similar to retail banks but a different legal structure
Jointly owned by all of their savers and borrowers

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11
Q

General insurance covers what

A

Motor accidents, fires etc

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12
Q

Life insurance provides what

A

Investments vehicles that pay out on death

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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

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14
Q

Stock broker activities

A

Trade in investments on behalf of their clients

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15
Q

What are the different investment distribution channels

A

Direct investment
Financial advisor
Independent financial advisor
Appointed representative

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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

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17
Q

What is an independent financial advisor

A

Someone who is permitted to give advice on any product in the market

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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

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19
Q

Goal of governments economic and industrial policy

A

Goal of creating low unemployment and interest rates

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20
Q

Government bench mark inflation

A

2%

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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

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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

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23
Q

What is the UK known by the EU as

A

A third country

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24
Q

What is the temporary permissions regime

A

Allows EEA financial services to passport to continue to operate in the UK

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25
Q

What is the lamfalussy approach

A

It is a 4 level procedure that speeds up the legislative process

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26
Q

What is the European Commission responsible for

A

The implementation, management and control of common policies adopted by the European council

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27
Q

What are the three European supervisory authorities

A

The European securities and markets authority
The European banking authority
The European insurance and occupational pensions authority

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28
Q

What is the role of the ESMA

A

It’s mission is to enhance investor protection and promote stable and orderly financial markets

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29
Q

What is the aESMA made up of

A

The regulators of securities markets throughout the EU

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30
Q

What is a competent authority

A

The regulators on the ESMA committees

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31
Q

What does the ESMA say about supervision

A

Supervision is carried out by the national supervisory authorities

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32
Q

What are the 3 objectives of the ESMA

A

Investor protection
Orderly markets
Financial stability

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33
Q

How does the ESMA achieve its 3 objectives

A

Promoting supervisory convergence
Assessing risks to investors, markets and financial stability
Completing a single rule book for EU financial markets
Directly supervising financial entities

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34
Q

Level 1 ESMA power

A

Giving technical advice to the European Commission when developing legislative products

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35
Q

Level 2 ESMA power

A

Drafting subordinate acts

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36
Q

What forms can subordinate Acts take

A

Delegating acts - setting out details needed to comply with laws
Implementing acts - setting out processes required to implement the laws in member states

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37
Q

Level 3 ESMA power

A

Developing guidelines and recommendations
I.e. overseeing a consistent approach to the implementation and enforcement of EU legislation

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38
Q

Level 4 ESMA power

A

ESMA can launch investigation into a concern and address a relevant national authority within 2 months

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39
Q

What is the role of the European Systematic Risk Board

A

To minute the entire financial sector to identify potential problems

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40
Q

What is the financial services action plan

A

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

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41
Q

What is an EU regulation

A

EU laws
As soon at they are passed they have binding legal force throughout every member state

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42
Q

What is an Eu directive

A

They have to be addressed by national authorities who then must take action to make them part of legal law

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43
Q

What was the single regulator for the UK financial services industry

A

The FSA
Financial services authority
It was overhauled in the FSA 2012 act to be broken up

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44
Q

What are the more specialized regulators created by the FSA 2012

A

The Financial Policy Committee
The prudential regulation authority
The financial conduct authority

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45
Q

Who runs the FPC

A

The Bank of England

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46
Q

Who runs the PRA

A

The Bank of England

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47
Q

Who funds the FCA

A

It levies upon regulated firms

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48
Q

Who is the PRA responsible for

A

Financial companies that manage significant risks in their balance sheets
I.e.
banks
Building societies
Insurers
Credit unions

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49
Q

Who is the payment systems regulator

A

It is a subsidiary of the FCA
But is an independent body with its own head and board

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50
Q

What is the aim of the payment streams regulator

A

To make payment streams work well for those who use them

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51
Q

What is a payment steam

A

Where you pay for something in a series of payments

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52
Q

What are the statutory objectors of the PSR

A

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

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53
Q

What are the powers of the PSR

A

Set standards
Impose rules
Carry out investigations
Act alongside the CMA to rectify anti competitive behavior

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54
Q

What is the financial policy committee

A

Established within the Bank of England and is responsible for macro prudential regulation

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55
Q

Who does the financial policy committee include

A

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

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56
Q

What is the role of the FPC

A

To assist the BoE to achieve its objective of financial stability and to take enhancing growth into account when making decisions

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57
Q

Who is the financial ombudsman service

A

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

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58
Q

What can the FOS make rewards for

A

Financial loss, pain and suffering
Damage to reputation
Inconvenience

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59
Q

What is the FCS

A

Financial compensation scheme
They provide compensation to firms what a an authorized person are unable to satisfy claims due to insolvency

60
Q

Who oversees the FCS

A

Jointly overseen by the FCA and the PRA

61
Q

What is the Tax and Chnacery chamber of the upper tribunal

A

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
Q

What happens if a company doesn’t agree with the decision made by TCCUT

A

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
Q

Who decides the setting of interest rates by the BoE

A

The banks monetary policy committee

64
Q

Who often do the MPC meet? And why?
The banks monetary policy committee

A

They meet on a monthly basis to set rates in order to meet the governments inflation target

65
Q

Who sets the yearly inflation target

A

The chancellor of the exchequer

66
Q

What is the basic principle of data protection

A

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
Q

What is the GDPR

A

It places on obligation on data controllers and data processors to register with the information commissioner

68
Q

What can the commissioner do if a breach of GDPR occurs

A

Enter premises and seize documentation without a warrant
Issue enforcement notices
Instigate criminal proceedings

69
Q

What are the 6 data processing principles

A

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
Q

What is a data processing notification

A

Data controllers must notify the relevant authority before carrying out data processing

71
Q

What is the personal data breach notification

A

Organizations in the UK must notify the ICO within 72 hours of a breach
Or without delay in a high risk situation

72
Q

Who considers an application for dual regulated firms

A

The FCA looks and gives consent or does not then the PRA considers this and acts

73
Q

What are the 3 objectives for the FCA

A
  • 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
Q

What are the general powers of the FCA

A

Authorization
Supervision
Enforcement
Sanctions and disciplinary action
Rule making

75
Q

What does the FCA handbook do

A

It grants the FCA power to make rules

76
Q

What is the structure of the FCA handbook

A

Divided into 7 main blocks which each deal with a different aspect of regulation

77
Q

What are the 7 main blocks of the FCA handbook

A
  1. High level standards
  2. Prudential standards
  3. Business standards
  4. Regulatory process
  5. Redress
  6. Specialist sourcebooks
  7. Listing, prospectus and disclosure
78
Q

What is the Temporary product intervention rules

A

They give the power to the FCA to make a rule without delay

79
Q

How long can a TPIRS last

A

12 months

80
Q

When can a TPIRS be used

A

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
Q

What is the firm systematic framework

A

It is a supervisory tool used by the FCA

82
Q

What are the features of the firm systematic framework

A

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
Q

What are the 2 types of firms categorized by the FCA

A

Fixed portfolio and flexible portfolio

84
Q

What is a fixed portfolio firm

A

Larger firms who pose a greater risk to the FCAs statutory objectives
They will have a dedicated FCA supervisor

85
Q

Flexible portfolio firm supervision

A

Supervised through issues and products objectives

86
Q

How is direct supervision carried out by the FCA for fixed portfolio firms

A

By supervision visits for FCA enforcement officers

87
Q

What can FCA enforcement officers do

A

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
Q

Cooperation with the FCA by firms rules

A

It is a criminal off me to not cooperate with the FCA or to provide misleading info

89
Q

What does the Regulatory Decisions Comittee do

A

They normally deal with the more significant matters in the disciplinary process in the FCA

90
Q

RDCs relationship to the FCA

A

Is it accountable to the board of the FCA but it is operationally independent

91
Q

Who are the members of the RDC

A

There is only one FCA employee who is the chair

92
Q

How will the RDC notify someone that they are under investigation

A

Through the issuance of a statutory notice

93
Q

What are the 3 types of statutory notice

A

Warning - provides details of actions proposed
Decision - details of disciplinary actions
Further decision - an amendment to decision

94
Q

When can a further decisions notice be issued

A

Only with the firms consent

95
Q

What is a final notice

A

Sets out the terms of the final actions that the regulator has decided to take

96
Q

What is the regulated activities order 2001

A

It is a secondary legislation to the FSMA 2000

97
Q

What are excluded activities

A

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
Q

What are excluded investments

A

Physical property
Currencies and transactions in currencies
Premium bonds
National savings certificates

99
Q

What is max criminal penalty for carrying out regulated activities without being regulated

A

2 years and an unlimited fine

100
Q

What is a voidable contract

A

A contract entered into where there has been a breach of general prohibition

101
Q

What can an investor do when there is a voidable contract

A

Enforce the contract and sue for damages if there is a loss
Void the contract and get money back

102
Q

Where does the FCA get the power to perform their regulatory role

A

From the FSMA 2000

103
Q

Who regulates banks in the UK

A

The PRA which means that the BOE regulates itself

104
Q

Who regulates foreign exchange market in the UK

A

The FCA

105
Q

Is a deposit regulated or not

A

Unregulated

106
Q

Who is the garantor of the FCA

A

The treasury

107
Q

Is the FCA private or public

A

Private

108
Q

What is included in Block1 high level standards

A

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
Q

What is in Block 3 business standards

A

Conduct of business rules COB
Code of market conduct MAR
Requirements relating to client assets and money CASS

110
Q

Are activities performed for commercial activities regulated or non

A

Non regulated

111
Q

Are futures for risk management regulated or non regulated

A

Non regulated
Risk mangement is exempt

112
Q

When is a statutory notice required

A

On the imposition of a financial penalty onto a firm

113
Q

What do regulated activities include

A

Dealing, arranging, managing, advising, safeguarding and admin - all of investments
Operating a CIS

114
Q

Is advice given to an intermediary regulated

A

Non regulated

115
Q

What is the role of the government

A

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
Q

Does the FCA have the power to impose a custodial sentence

A

No, it must go to the court and persuade them to do so

117
Q

What are the 3 European Supervisory Authorities

A

ESMA
European Banking Authority
European Insurance and Occupational pensions authority

118
Q

When managing investments what must a person do according to FSMA 2000

A

Exercise discretion

119
Q

Who operates the TCCUT

A

It is a government department as it is run by the ministry of justice

120
Q

Does the ESMA supervise regulatory firms

A

No
It works as setting high libel standard and leaves day to day supervision to the national supervisory authorities

121
Q

Who does the COLL sourcebook apply to

A

IVCVs and managers of authorized unit trusts

122
Q

What is the general prohibition

A

It states that it is illegal to carry on investment business without authorisation or exemption

123
Q

What is a defence if you breach the general prohibition

A

To show that you took all reasonable precautions to avoid committing the offense or that you excercised due diligence

124
Q

Is providing investment services to another member of your group regulated or non

A

Non as it counts as trading on one’s own account

125
Q

Is a loss adjuster an exempt investment

A

Yes

126
Q

who is in charge of regulating financial stability in the UK

A

the BoE

127
Q

who sets the statutory objectives for the BoE and the treasury

A

parliament

128
Q

what are the key risks of the financial policy comittee

A

systematic risks

129
Q

who is the FCA accountable to

A

the HM treasury

130
Q

who are fund managers regulated by

A

FCA
PRA if they are very big

131
Q

who appoints the FCA board

A

the treasury

132
Q

who is the FOS accountable to

A

the FCA

133
Q

what are the general powers of the FCA

A

grant part 4a permission, approve individuals
rule making
prosecuting for financial crimes
supervision, enforcement, disciplinary actions

134
Q

which powers can the FCA / PRA delegate?

A

powers of investigation

135
Q

who is the RDC

A

an independent committee who makes the law decisions

136
Q

what disciplinary powers does the FCA have

A

withdrawal of approval
prohibition
restitution order - i.e. make good
public statement of misconduct
prosecution - take to court

137
Q

how should a firm given part 4a permission be described

A

authorsied

138
Q

how should a firm given part 4a permission be described

A

authorised

139
Q

what is the S56 prohibition order

A

it is the greatest punishment that the FCA can give to an individual
no jail but a fine without court

140
Q

what are the excluded regulated activities

A

newspapers
television broadcasts
unpaid trustees e.g. nominees / executors
employee share schemes
dealing as a principle and end user
commercial

141
Q

what are the excluded investments

A

property
tangible assets (incl options and futures on)
currencies
premium bonds
national savings certificates

142
Q

if an individual is responsible for breaking the general prohibition which court should you go to

A

the crown court

143
Q

are options on precious metals regulated

A

yes

144
Q

are options on currency regulated

A

yes

145
Q

who does the COLL handbook apply to

A

IVCVS
AUT

IMC Unit 1 (11 decks)

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