Chapter 1 - Introduction To Financial Markets Flashcards
Conscious vs Unconscious Saving
Depositing money in bank vs Using a fund manager
2 ways companies lend money
Short Term Money Markets, Long Term Bond Markets
Name of the UK Govt shortfall in spending
Public Sector Net Cash Requirement (PSNCR)
Wholesale vs Retail Investors?
Institutional (pension, charities, insurance) vs everyday fellows
Role of Inv Bank
– Trading as principal: Buying and selling shares for their own account
– Broking: Dealing on behalf of clients
– Market making: Quoting prices to other market participants
– Research: Providing analysis on investments and their potential
– Corporate finance: Advice and execution related to the raising of capital by companies
– Mergers and acquisitions: Takeover advice
– Fund management: Investing client funds to maximise returns
What differentiates Building Socs from Retail banks?
They are owned jointly by all of their savers
and borrowers and do not pay returns to shareholders
Name 3 Investment Distribution Channels?
Direct, via IFAs, or Appointed Reps
Economic focus of Governments
They have the ultimate goal of establishing low unemployment and low interest rates to create a
constant and sustainable growth.
Whats the governments Inflation Benchmark?
2.0%
How is inflation affected by the Gov, and BoE
Gov: Spending and Taxation, Boe: Controlling base rate of interest
FSA (2012) Four Objectives
One strategic objective:
* Ensure the relevant markets work well
Three operational objectives
* Consumer protection: Ensuring an appropriate degree of protection for consumers
* Integrity: Protecting and enhancing the integrity of the UK financial system
* Competition: Promoting effective competition in the interests of consumer
Major objectives of the EU?
- Economic and social progress
- Sustainable development
- An area without internal frontiers
- Economic and monetary union
The three European Supervisory Authorities (Post Brexit)
- The European Securities and Markets Authority (ESMA)
- The European Banking Authority (EBA)
- The European Insurance and Occupational Pensions Authority (EIOPA)
ESMA Mission and 3 objectives
- To enhance investor protection and promote stable and orderly financial markets
ESMA has three objectives:
* Investor protection
* Orderly markets
* Financial stability
ESMA Four activities to achieve objectives
- Promoting supervisory convergence
- Assessing risks to investors, markets and financial stability
- Completing a single rulebook for EU financial markets
- Directly supervising financial entities
What does the ESRB do?
Monitor the entire financial sector to identify potential
problems.
Objectives of the FSAP
- To create a single EU wholesale market
- To achieve open and secure retail markets
- To create state of the art prudential rules and structures of supervision
What did FSMA 2000 do?
Created the framework for regulation in the UK financial services industry.
What 3 things fell out of the FSA 2012 overhaul?
FPC, PRA, FCA
Role of the BoE
Overseeing financial markets infrastructure (FMI)
* E.g. payment systems and recognised clearing houses
- Broad overview of the financial system
- Maintaining stability in the financial system
- Appointing the chairman of the Takeover Panel
Oh you like PRA? Name 3 PRA Firms?
- Deposit takers
- Insurers
- Significant investment firms
Penalty for breaching GDPR?
4% of annual global turnover or €20m
1 strategic and 3 operational FCA objectives
Strategic objective
* To ensure that relevant markets function well
Operational objectives
* Consumer protection
- Securing an appropriate degree of protection for consumers
* Integrity
- Protecting and enhancing the integrity of the UK financial system
* Competition
- Promoting efficiency and choice in the market for financial services
General Powers of FCA
4A Auth
4A Rulemaking
Financial Crime Prosecution
Supervision and Disciplinary Action
List FCA handbook
Block 1: High-level standards [PRIN, SYSC, COND, APER, COCON, FIT, TC]
Block 2: Prudential standards
Block 3: Business standards [COBS, CASS, MAR]
Block 4: Regulatory processes [SUP, DEPP]
Block 5: Redress [DISP, COMP]
Block 6: Specialist sourcebooks [COLL]
Block 7: Listing, prospectus and disclosure (UKLA)
Treating customers fairly: Outcomes. List em.
- Outcome 1: Fair treatment of customers is central to the corporate culture of all firms
- Outcome 2: Products and services meet the needs of identified consumer groups and
are targeted accordingly - Outcome 3: Consumers are provided with clear information before, during and after
the point of sale - Outcome 4: Any advice is suitable and takes account of their circumstances
- Outcome 5: Products and services perform as firms have led consumers to expect
- Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by
firms to change product, switch provider, submit a claim or make a complaint
FCA 3 pillars of risk supervision
- Pillar 1: Firm systematic framework – preventative in nature
- Pillar 2: Event-driven work – reacting to crystallisation of conduct risk
- Pillar 3: Issues and products – campaigns focused upon specific issues
FCA Bailiff powers
- Enter the premises of an authorised firm without notice
- Demand documents, file, tapes, data
- Interview any employee
Recite the General prohibition as part of the Regulated Activities (S19 FSMA 2000) order
‘No person may carry on a regulated activity in the UK unless he is an authorised person or an exempt person’
This includes Specified activity undertaken with a specified investment
2 penalties for breaching the Regulated Activities Order
Magistrates Court
6 months and/or £5,000 fine
Crown Court
2 years and/or unlimited fine
