Chapter 3 The regulatory and legal environment

Question 1

what is the Council of Financial Regulators (CoFR)

Answer 1

the CoFR contributes to NZ’s economic wellbeing through a coordinated and responsive financial system regulation, it is made up of 5 members.
1. Reserve Bank of NZ (RBNZ)
2. Financial Markets Authority (FMA)
3. Commerce comission
4. Ministry of Business, Innovation and Employment (MBIE)
5. The treasury

Question 2

1. Reserve Bank of NZ (RBNZ)
2. Financial Markets Authority (FMA)
3. Commerce comission
4. Ministry of Business, Innovation and Employment (MBIE)
5. The treasury

Make up what regulatory body

Answer 2

the Council of Financial Regulators (CoFR)

Question 3

What does the Reserve bank of New Zealand do

Answer 3

admisters and enforces a range of legislative provisions primarily under the Reserve Bank of New Zealand Act 2021. it is responsible for the overall stability of the financial system, the national payments infrastructure as well as monetary policy, via the Monetary policy committee as defined in the Remit

Question 4

what is the FMA

Answer 4

The financial Markets authority is the financial markets regulator and operates under the powers of the financial markets conduct act 2013. its mission is to promote fair, efficient and transparent financial markets . the FMA is responsible for enforcing securities, financial reporting and company law as they apply to financial services and securities markets.

Question 5

what are the 5 regulatory functions used by the FMA to regulate both the capitl markets and the provisions of financial services

Answer 5

1. monitoring and supervision
2. investigations and enforcement
3. policy and guidance
   4.licensing
   5.education and information

Question 6

updated disclosure requirements as of march 21 requires anyone who gives financial advice to disclose what 7 things

Answer 6

1. the liscnece they hold and duties they are subject to
   2.commissions, incentives and conflicts of interest
2. the financial advice services they can provide
3. any previous disciplinary history and certain criminal conviction
4. the complaints handling and dispute resolution process
5. fees and costs associated with the advice
6. for financial advisors, bankruptcy proceedings within fours years of the date of discharge

Question 7

what 4 things defines a Wholesale client under the Financial Markets Conduct Act 2013

Answer 7

1. an eligible investor
2. investment activity
3. a large investor
4. an investment business

Question 8

who is responsible for the enforcement of competition, fair trading and consumer credit laws in NZ. also the enforcement of the provisions of the credit contracts and consumer finance ACT (CCCFA) 2003

Answer 8

the commerce commission

Question 9

what are the 4 approved disputes resolution schemes relating to the provisions of financial services

Answer 9

1. the banking ombudsman scheme
2. the insurance and financial services Ombudsman
3. financial services complaints Limited
   financial dispute resolution service

Question 10

The banking Ombudsman (BOS) can assist customers with most banking related complaints, they are able to provide info about banking practises and procedures, details about how to complain about bank, and info about a bank’s legal obligations and applicable industry codes. However are unable to consider complaints relating to financial loss above $…k

Answer 10

350k

Question 11

what term describes the process whereby criminals try to disguise the origin of their illegal profits through turning ‘dirty’ money into ‘clean’ funds.

Answer 11

money Laundering

Question 12

what are the 3 stages of the money laundering cycle

Answer 12

1. Placement (introducing illegal funds into the formal financial system)
2. layering (moving, dispersing or disguising illegal funds or assets to conceal their true origin
3. integration (investing these now distanced funds or assets in further criminal activity, or legitimate business - at this stage the funds or assets appear to have been legitimately acquired

Question 13

terrorism financing is the financial support in any form, of terrorism or of those who encourage, plan or engage in terrorism . It can be divided into two broad areas ..

Answer 13

1. funding of terrorists attacks
2. logistical funding

Question 14

what does the basal committee on Banking Supervision (BCBS) do?

Answer 14

strengthens the regulation, supervision and practises of banks worldwide, with the purpose of enhancing financial stability. They formulate and publish guidelines and standards which are expected to be adhered to by member organisations.

Question 15

why was Basel lll devloped and by who

Answer 15

developed by the basal committee in response to liquidity and quality issues revealed by the global financial crisis in the late 2000s.

Question 16

what is the legslative framework governing the rehulation of money laundering and terrorism financing in NZ

Answer 16

The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT)

Question 17

what are the 4 risks addressed by the Basel lll

Answer 17

credit risk
operational risk
market risk
liquidity risk

Question 18

what are the 3 main components of the reserve banks liquidity policy

Answer 18

minimum ratio requirements
rules and guidance on the risk management processes
reporting requirements on liquidity position

Question 19

what are the 6 elements of a valid contract

Answer 19

1. consent (no duress)
2. capacity (over 18 and of sane mental state)
3. consideration (give something of value to the other)
4. offer and acceptance (each party must agree to the T &C’s
5. Intention (must intend to tenter the contract)
6. legal (activity of contract must be legal)

Question 20

what re the two differnet types of law in NZ

Answer 20

statute law (passed by parliament) and common law (case law developed by precedent in legal cases)

Question 21

what is a fiduciary

Answer 21

a person who holds a legal or ethical relationship of trust with one or more parties.

Question 22

hat is fiduciary duty

Answer 22

relates to the care of money or other assets for another person ( one person is often vulnerable in these relationships and the fiduciary is required to act at all times for the sole benefit and interest of the one who trust)

Question 23

what are the 3 common business structures

Answer 23

sole trader
partnership
company

Question 24

what is a sole trader

Answer 24

an individual person trading as the individual legally responsible for all aspects of the business

Question 25

what is a partnership

Answer 25

a business structure that involves a number of people who operate the business together

Question 26

what is a company

Answer 26

a seperate legal entity with a complex business structure and additional set-up costs and reporting requirements

Question 27

what are the 5 key aspects of a company

Answer 27

1. it is a seperate legal entity
2. limited liability compared to other business structures
3. must be registered with the companies office
4. company officers and directors are required to understand and comply with all obligations under the companies act 1993
5. the money the business earns belongs to the company

Question 28

what are usually formed to safeguard asses and for beneficiaries to earn income related to those assets

Answer 28

trust - whereas a company is formed for people to work towards generating profit

Question 29

what is a trust deed

Answer 29

a legal document, that specifies how trustees are appointed, the beneficiaries and the trust property or assets that will be the subject to the trust

Question 30

can a company be a trustee of a trust

Answer 30

yes

Question 31

what term is used to describe the ways organisations are directed and controlled and how ther affais are handled by the board of directors, senior managemnt and other employees

Answer 31

corporate governance