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Chapter 4 - COBS and CASS > Chapter 3 - MiFID and MiFIR > Flashcards

Chapter 3 - MiFID and MiFIR Flashcards

1
Q

What regulation did MiFID replace?

A

Investment Services Directive (ISD)

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2
Q

What activities are newly covered by MIFID?

A
  • Investment Advice
  • Underwriting investments
  • Operating an MTF
  • Investment in commodities, credit derivatives, CFDs
  • Investment research
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3
Q

Which instruments are covered by MiFID?

A
  • Transferable securities
  • Money market
  • CIS
  • Options, futures and swaps relating to securities, currencies, interest rates and emission allowances.
  • Options, futures and swaps relating commodities that are to be settled in cash.
  • Options, futures and swaps relating to commodities that are to be physically settled except wholesale, energy products traded on an OTF.
  • Derivatives for transferring credit risk
  • CFDs
  • Climatic variables, freight rates, inflation rates that must be settled in cash and traded on an MTF or OTF.
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4
Q

Which firms are covered by MiFID?

A
  • Investment firms
  • Portfolio managment firms
  • Stockbrokers
  • Commodity dealers
  • Futures and Options firms
  • Venture capital
  • Corporate Finance
  • Credit advisers
  • Banks
  • Exchanges
  • UCITS
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5
Q

Which firms are exempt from MiFID

A

Article 3 exemption for:

  • Advice only firms
  • Transmission only firms
  • Not holding client funds

Article 2.1 - incidental exemption for:

  • Insurance
  • Employee schemes
  • Own account dealing
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6
Q

Which instruments are exempt from MiFID?

A
  • Spot FX

- Unstructured cash deposits

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7
Q

What are the additional firms within the scope of MiFID 2?

A
  • Commodity firms
  • Data providers
  • Third country firms
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8
Q

What are the additional instruments within the scope of MiFID 2?

A
  • Structured deposits

- Emission allowances

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9
Q

What instruments are now subject to transaction monitoring and reporting under MiFID 2?

A

Bonds and derivatives.

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10
Q

Under MiFID 2, when must trade reports be published for equities and non-equities.

A

Within 1 minute - equities

Within 15 mins - non-equities

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11
Q

Under UCITS, what are the requirements for an OEIC to be eligible?

A
  • scheme is solely invested in transferable securities.
  • no more than 10% of fund is in shares and bonds of the same issuer
  • no more than 5% of assets can be invested in another fund
  • only able to hold client money for ancillary liquid cash
  • derivatives to only be used for portfolio management and hedging purposes
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12
Q

What did the Management Directive for UCITS do?

A
  • It outlined the extent of capitalisation, administration and accounting that a UCITS fund management company can do.
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13
Q

What did the Products Directive for UCITS do?

A
  • Gave powers to UCITS to invest in money market instruments, CISs, deposits, financial derivatives and index tracking.
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14
Q

What is a key feature of UCITS VI?

A
  • UCITS management company doesn’t have to be in the same state as the fund.
  • KIID
  • Master feeder structures - a fund can invest majority of funds in another fund.
  • Improved supervisory cooperation
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15
Q

What did the Prospectus Regulation do?

A

It created a new regime for prospectuses so that once approved by a home state listing authority, the prospectus could be marketed across the the EEA.

It also made it easier and cheaper for issuers to raise finance.

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16
Q

Which firms are affected by EMIR?

A

Trade repositories, derivatives traders and central counterparites.

17
Q

What did EMIR introduce for derivatives to be traded on?

A

OTF - Organised Trading Facility

18
Q

Trade in which instruments must be reported to the trade repository?

A 
Interest rates
Equities
Forex
Credit
Commodity Derivatives
19
Q

How often can outstanding financial derivatives contracts be reconciled?

A

Daily, Weekly, Monthly

20
Q

How often can outstanding financial derivatives contracts be reconciled?

A

Both counterparties to the trade must report to the trade repository who reports to ESMA.

21
Q

What is the sourcebook for non-CRD firms with regards to capital adequacy requirements?

A

IPRU-INV

22
Q

What is the sourcebook for non-CRD firms with regards to capital adequacy requirements?

A

Pillar 1 - min. capital requirements for credit, market and operation risk.

Pillar 2 - Firms and supervisor decide on whether pillar 1 capital requirements are enough.

Pillar 3 - Disclose risks to improve market discipline.

23
Q

What are the types of firms that are not subject to the CRD (IPRU-INV)?

A

Tier 1: Permanent share capital, reserves and externally verified profits.

Tier 2: Long term debt and revaluation reserves

Tier 3: Short Term debt and interim trading book profits.

24
Q

What are the types of firms that are not subject to the CRD (IPRU-INV)?

A
  • Professional firms
  • Lloyds underwriters
  • Fund managers
  • CAD exempt firms with limited business under MiFID
  • Service companies
  • Financial advisory companies
  • Credit unions operating JISAs.
25
Q

What are the types of firms that are not subject to the CRD (IPRU-INV)?

A

Personal investment firms were subject not subject ot the CRD were tested with £10,000 of own funds and expenditure based test which restricted the amount of subordinated loans which can be used to meet the firms capital requirements.

26
Q

What did Basel III try to do?

A
  1. Enhance quality and quantity of capital
  2. Increase Pillar 1 requirements for counterparty risk
  3. Leverage ratios to be a backstop to risk-based capital
  4. 2 new capital buffers - capital conservation, counter cyclical capital buffer
  5. Enhanced liquidity regime
27
Q

What are the 3 aims for the CRD?

A
  1. Hold more and better quality capital
  2. More regulatory powers for supervisors to monitor banks and sanction them.
  3. Single rulebook for banking regulation
28
Q

What is a BIPRU firm and what activities can it carry out?

A

Firm subject in part to the CRD

Activities:

a. receive and transmit orders
b. execute orders for clients
c. portfolio management
d. investment advice

29
Q

What activities cannot be done by a BIPRU firm?

A
  • own account dealing
  • underwriting on a firm commitment basis
  • underwriting on a non firm commitment basis
  • operating a MTF
  • Ancillary services - safeguarding assets
30
Q

What are IFPRU firms?

A

Firms that are no BIPRU firms and are subject to Corporate Reporting (COREP) on capital requirements.

Also subject to FINREP - consolidated reporting

UCITS and AIFMD firms doing MiFID activity

31
Q

What is an IFPRU limited license firm?

A

Not subject to CAD but cannot carryout ancillary activities in relation to safeguarding assets.

Chapter 4 - COBS and CASS (8 decks)

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