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Investment Management Certificate (IMC) > “Chapter 3- The Regulation of Financial Markets and Institutions- Section 2 > Flashcards

“Chapter 3- The Regulation of Financial Markets and Institutions- Section 2 Flashcards

1
Q

Describe 3 objectives of FCA

A

Financial Conduct Authority

  • Consumer protection
  • Enhance integrity
  • Promote effective competition
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2
Q

What is the scope of the FCA? 4 points

A

Ensure conduct of business regulation for all firms including dual regulated firms and firms passporting into the UK

Act as lead regulator for firms which do not have PRA authorisation.

Regulate markets except clearing and settlement

Oversight of client assets and counter crime in regulated markets and non-regulated markets such as e-money.

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3
Q

Describe PRA - Prudential Regulation Authority

A

Legal entity- governed by PRC (Prudential Regulatory Council) from within BoE.

Regulator for large firms such as banks, insurers.

Regulates central counterparties, settlement of systems and payment systems.

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4
Q

What basis does the PRA supervise firms on?

A

Capital

Liquidity

Leverage

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5
Q

Describe the FPC - Financial Policy Committee

A

Tasked with protecting and enhancing systemic risk and increase robustness of the UK’s financial system.

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6
Q

Describe power of FPC

A

Can make recommendations and advice to FCA, PRA

Formal powers of direction over FCA and PRA via macroprudential tool sanctioned by the Treasury

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7
Q

Explain different rules of the FCA and the PRA for dual regulated firms

A

Dual regulated firms initially apply to PRA.

Follows one of two processes

-Consent:

FCA has to give consent to the PRA to proceed.
No consent, PRA refuses application

Consult:

Firm applies for change in control that is materially important for the FCA’s objectives e.g.- passporting but PRA is not bound to FCA.

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8
Q

How are dual regulated firms enforced?

A

FCA consults PRA. Checks if issue is relevant to both. If only one, single investigation. If joint, separate but keeps other informed.

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9
Q

Explain scope of FSMA 2000

A

Anyone who undertakes investment business in the UK is required to be an authorised person or an exempt person.

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10
Q

Explain two types of authorised person as per FSMA 2000

A

Has part 4A permission, who applies to FCA under part 4A in FSMA 2000

A person who qualifies for authorisation by passporting.

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11
Q

What is the penalty under FSMA for infringements?

A

Up to 7 years jail

Fines

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12
Q

Explain scope of RAO 2001 - Regulated Activities Order

A

Scope: Deals with specified investments and credit such as financial assets and non-dwelling mortgages.

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13
Q

Give 3 examples of regulated activities

A

MTFs

OTFs

Dealing/Arranging deals/Managing investments

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14
Q

Explain function of PSR - Payment Systems Regulator

A

Subsidiary of FCA

Utility (does it bring value) style approach to regs

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15
Q

Give 3 examples of payment systems bound by PSR

A

CHAPS

BACS

Faster Payments Service

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16
Q

Explain function of CMA- Competition and Markets Authority

A

Established under EERA 2013

Will investigate if turnover test is breached

Turnover test met if:

  • Target company has turnover > £70m
  • Merged company will control >= 25% in the UK

Must decide to pursue within 40 days

17
Q

Explain how PTM is financed

A

When total trade value is > £10,000. (Equities only, no options)

Then PTM levy is £1

18
Q

Explain role of PTM

A

Set out in Companies Act 2006

Act as referee for fair CONDUCT of takeover bids and ensure all stakeholders are treated fairly.

19
Q

Conditions for City Code Bid Timetable

A

If >= 30% of voting rights acquired, bidders has to make cash offer at previous year high.

Offer document given within 28 days of intention to buy to the target company.

Company directors must advise to shareholders their views within 14 days after the offer document is set.

Offer remains open for at least 21 days.

If bidder’s stake become 50%, offer kept open for remaining shareholders to consider.

If bidder reaches >= 90% voting rights, then can force other shareholders to sell.

20
Q

Important concepts about GDPR

A

Consent: Need to be specific about use of data and should not be used for any other purpose and for not longer than originally stipulated.

Need to exemplify processing of the data

Data subjects have the right to destroy and waive their data from being processed.

21
Q

If there is a data breach, how long will companies have before they have to notify the ICO?

A

72 hours

22
Q

Can EEA data be exported out of the EEA?

A

No, unless special treaties are put in place.

23
Q

What are the fines for breaching GDPR

A

Important provisions

-Greater of

20m EUR or 4% annual revenue.

Non-important provisions

-Greater of

10m EUR or 2% annual revenue.

24
Q

Explain purpose of Trustee Act 2000

A

Allows a trustee to make any kind of investment consulting proper advice to evaluate:

Suitability

Diversification

This does not apply to occupational pension schemes.

25
Q

Explain purpose of Pension Act 2008

A

Create TPR- The Pensions Regulator

Create PPF- The Pension Protection Fund for insolvent DB schemes sponsors

Introduce scheme specific funding requirements

26
Q

Explain particulars of the PPF- Pension Protection Fund

A

PPF covers up to 100% of current DB pensioners

PPF covers up to 90% of DB members who are not of pensionable age.

27
Q

Explain the options of how a pension may be taken

A

Take a UFPLS- uncrystallised funds pension lump sum-
25% tax free.

Can be taken from age 55 and more than one instance of UFPLS over life of pension

Purchase lifetime annuity. Can be taken in tandem with the UFPLS

Enter a flexi-access drawdown plan, knowing the drawdowns will be taxed as income.

28
Q

Explain Statement of Investment Principles

*(Reviews every three years or when there is a significant change in the investment policy)

A

Sets principles of how decisions about investments are made and includes policy on asset allocation, risk management, realising investment schedules, extent ESG is taken into account and if voting rights is part of the governance of the scheme.

29
Q

Explain purpose and scope of FCA industry codes

A

Ensure senior managers and other certifiable individuals of authorised firms are compliant with regards to conduct.

Investment Management Certificate (IMC) (5 decks)

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