Chapter 3- The Regulation of Financial Markets and Institutions- Section 1 Flashcards
Explain the legal status of EU Directives and regulations within the UK
Directives have to be implemented by national government under S(2) of European Community Act 1972 or primary legislation.
Directive takes precedence above national law for state to individual. But does not apply horizontally person to person,
Regulations are more direct. They are binding as soon as they are passed by European Commission.
Explain role of ESMA
European Securities and Markets Authority
Enhance integrity, transparency and investor protection in Europe by supervision
Explain powers of ESMA (The 4 Levels)
High-level
“______” Acts
Develop “______”
Escalation
4 Levels
Level 1- Directives and regulations set out high level objectives but ESMA can be asked for technical help when setting out these agendas
Level 2- Draft subordinate acts
Information clarification and document standardisation
Level 3- ESMA develops guidelines to establish consistent application of law across the EU but are not binding.
Level 4- ESMA can launch an enquiry either by itself or at request of national competent authority and give a recommendation after 2 months.
Explain purpose of MiFID ||
Enable passporting of financial services throughout the EU if authorised in any member state without any additional clearance required.
Effective Jan 2018
Explain the scope of MiFID ||
Standard passporting rules from MiFID but additional.
OTFs are regulated to capture previously unregulated trades.
Increase transparency requirements after trade.
Limit size of commodity positions to reduce speculation in essentials.
Explain how MiFID works with firms which provide investment and ancillary services
If BOTH investment and ancillary services are provided, then MiFID || applies.
If ONLY ancillary services are provided then, MiFID || does not apply.
Give 3 examples of investment services applicable to MiFID ||
Investment advice
Portfolio Management
Order execution on behalf of clients
Give 3 examples of ancillary services applicable to MiFID ||
Custodianship - Safekeeping of administration of financial instruments for clients
Providing forex services for the buying and selling of international securities.
Granting loans to the investor to execute a transaction.
Explain purpose and scope of UCITS - Two directives
Undertakings for Collective Investment in Transferable Securities.
Management and Product Directives
Remuneration policy
Key Investor Information Document
Passport for management companies, similar to MiFID ||
Purpose and authorisation of AIFMD
Alternative Investment Fund Managers Directive
2013
Includes PE, hedge funds, retail investment funds and real estate funds.
Needs Authorisation if: (Threshold)
> 100m EUR AuM if leverage used
500m EUR AuM if leverage not used and redemption after 5 years
Explain subthreshold for AIFMD and who it applies to
- FCA authorised but not opted in to AIFMD
- Internal AIFM of investment trust
- Unauthorised manager of property funds by an FCA approved operator
- Applied for another designation
Other requirements AIFMD
Submit timely reports to regulators stipulating fund info and remuneration paid out.
Explain purpose of EMIR
Implements EMIR through FSMA 2000
Covers OTC derivatives, central counterparties and trade repositories.
Need to:
Clear OTC derivatives timely
Put in place risk management positions on these transactions that are still going
Report derivative transactions to a trade repository
Explain FATCA and CRS
FATCA- US Law -= Prevent tax evasion by US citizens using non US facilities.
Need to either pay 30% withholding tax at source or must report to IRS
Institutions to do not need to tell clients this information has been handed over.
CRS- same thing (eventually) but for non-US countries
Implemented by OECD
Explain purpose of BMR
EU Benchmark Regulation
Purpose-
Ensure benchmarks and indices such as LIBOR and EUROBOR are reliable and minimise conflicts of interest.
