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IMC Module 1 > Chapter 1 - Introduction To Financial Markets > Flashcards

Chapter 1 - Introduction To Financial Markets Flashcards

1
Q

Conscious vs Unconscious Saving

A

Depositing money in bank vs Using a fund manager

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2
Q

2 ways companies lend money

A

Short Term Money Markets, Long Term Bond Markets

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3
Q

Name of the UK Govt shortfall in spending

A

Public Sector Net Cash Requirement (PSNCR)

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4
Q

Wholesale vs Retail Investors?

A

Institutional (pension, charities, insurance) vs everyday fellows

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5
Q

Role of Inv Bank

A

– 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

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6
Q

What differentiates Building Socs from Retail banks?

A

They are owned jointly by all of their savers
and borrowers and do not pay returns to shareholders

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7
Q

Name 3 Investment Distribution Channels?

A

Direct, via IFAs, or Appointed Reps

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8
Q

Economic focus of Governments

A

They have the ultimate goal of establishing low unemployment and low interest rates to create a
constant and sustainable growth.

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9
Q

Whats the governments Inflation Benchmark?

A

2.0%

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10
Q

How is inflation affected by the Gov, and BoE

A

Gov: Spending and Taxation, Boe: Controlling base rate of interest

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11
Q

FSA (2012) Four Objectives

A

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

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12
Q

Major objectives of the EU?

A
  • Economic and social progress
  • Sustainable development
  • An area without internal frontiers
  • Economic and monetary union
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13
Q

The three European Supervisory Authorities (Post Brexit)

A
  • The European Securities and Markets Authority (ESMA)
  • The European Banking Authority (EBA)
  • The European Insurance and Occupational Pensions Authority (EIOPA)
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14
Q

ESMA Mission and 3 objectives

A
  • To enhance investor protection and promote stable and orderly financial markets

ESMA has three objectives:
* Investor protection
* Orderly markets
* Financial stability

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15
Q

ESMA Four activities to achieve objectives

A
  • Promoting supervisory convergence
  • Assessing risks to investors, markets and financial stability
  • Completing a single rulebook for EU financial markets
  • Directly supervising financial entities
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16
Q

What does the ESRB do?

A

Monitor the entire financial sector to identify potential
problems.

17
Q

Objectives of the FSAP

A
  • 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
18
Q

What did FSMA 2000 do?

A

Created the framework for regulation in the UK financial services industry.

19
Q

What 3 things fell out of the FSA 2012 overhaul?

A

FPC, PRA, FCA

20
Q

Role of the BoE

A

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

21
Q

Oh you like PRA? Name 3 PRA Firms?

A
  • Deposit takers
  • Insurers
  • Significant investment firms
22
Q

Penalty for breaching GDPR?

A

4% of annual global turnover or €20m

23
Q

1 strategic and 3 operational FCA objectives

A

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

24
Q

General Powers of FCA

A

4A Auth
4A Rulemaking
Financial Crime Prosecution
Supervision and Disciplinary Action

25
Q

List FCA handbook

A

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)

26
Q

Treating customers fairly: Outcomes. List em.

A
  • 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
27
Q

FCA 3 pillars of risk supervision

A
  • 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
28
Q

FCA Bailiff powers

A
  • Enter the premises of an authorised firm without notice
  • Demand documents, file, tapes, data
  • Interview any employee
29
Q

Recite the General prohibition as part of the Regulated Activities (S19 FSMA 2000) order

A

‘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

30
Q

2 penalties for breaching the Regulated Activities Order

A

Magistrates Court
6 months and/or £5,000 fine

Crown Court
2 years and/or unlimited fine

IMC Module 1 (10 decks)

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