Chapter 8 - Financial regulations and professional intergrity

Question 1

9iik iujhnb What is the role of the government

Answer 1

Establish the legal frameworks within financial markets that operate and supervise them. They will establish regulatory bodies and oversee the functioning and fairness. They delegate responsibilities to these bodies

Question 2

the main purposes of regulation

Answer 2

• Maintain and promote fairness
• promote understanding for public
• provide protection
• minimize crime
• reduce systematic risk
• assist in financial stability

Question 3

benefits of regulation

Answer 3

• increases confidence and trust
• encourages wealth creation
• reduces market and systematic risk
• enhances consumer protection
• reducing crime

Question 4

what is the financial policy committee

Answer 4

Established for financial stability by analyzing systematic risk. Has the power to comply-execution only to PRA and FCA to comply recommendations

Question 5

What is the Prudential regulations authority

Answer 5

Part of the BoE and has a primary objective of enhancing financial stability by promoting safety and soundness of PRA-authorized firms, so it takes an intrusive method. IT IS REFERED TO AS A DUAL-REGULATED FIRM

Question 6

what is the FCA responsible for

Answer 6

• regulating standards of conduct in retail and wholesale markets
• supervising trading infrastructure
• so firms avoid being PRA regulated
• acting as an authority for firms becoming listed

Question 7

What are the FCA three primary objectives

Answer 7

• Protect customers
• Enhance integrity
• maintain competiveness

Question 8

who is responsible for overseeing the FCA

Answer 8

HM treasury

Question 9

which firms needed to be authorized by the FCA and PRA

Answer 9

Solo-regulated = authorized by FCA
Dual-regulated = authorized by FCA and PRA

Question 10

what do both FCA and PRA rules state

Answer 10

Act with integrity, skill care, and have adequate financial resources

Question 11

what does the new customer duty detail in the principles

Answer 11

• act in good faith
• avoid causing harm
• enhance and support retail customers to pursue financial objectives

Question 12

What is the FCA 6 consumer outcomes

Answer 12

• consumer can be confident
• products designed to meet needs
• clear information
• advice is suitable
• acceptable standards

Question 13

what is the new customer duty

Answer 13

Finalized by the FCA in 2022, described as TCF. The change is designed to set a higher standard than principle 6. It is a concept focused on customer outcome rather than processes taken affected 31st July 2023

Question 14

what is money laundering and the stages involved

Answer 14

The process of turning money that is derived from criminal activity into money which appears to have been legitmently acquired.
The stages:
- Placement - first stage, involving placing criminally derived cash into banks
- layering - second, involves money moving around so authorities struggle
- integration - third, successfully when the dirty money appears to be legit and is intergraded into financial system.

Question 15

what is the difference between money laundering and terrorist funding

Answer 15

Often smaller sums are required to commit terrorist attacks
it is harder to identify when funds become investments in terrorist activities
terrorist funding requires modern techniques

Question 16

how can fraud affect individuals, what’s the different types

Answer 16

Identity fraud - using misappropriate of the identity, such as documentation
Identity theft - impersonating fraud, misappropriation of their identity, such as passport

Question 17

who prosecutes companies when bribery occurs?

Answer 17

The serious fraud office

Question 18

what is insider dealing and the securities associated?

Answer 18

Buying financial instruments by knowledge inside the company. Also - releasing sensitive information to public which could affect share price.
the instruments
- shares, bonds, warrants, depositary receipts, options, futures, contracts

Question 19

what is market abuse and the consequences of it? what does market abuse include?

Answer 19

Behaviors/practices that manipulate financial markets.
consequences = fines, and sanctions.
Market Abuse
- insider dealing
- public disclosure requirements
- market manipulations

Question 20

who has the FCA enforced for market abuse?

Answer 20

UK Market abuse regulations (UK MAR).

Question 21

in order to comply with the 2018 data protection act, firms must?

Answer 21

• notify the information to commissioner’s office
• process personal information in accordance
• answer subject-access request from individuals

Question 22

what to do when data leaks?

Answer 22

MUST report to supervisory authority, and report to individual

Question 23

what are the requirements for handling complaints?

Answer 23

• notify the complainants of their right to go to the Financial Ombudsman Service
• complaints handling is required to issue final response within 8 weeks.

Question 24

what is the FOS

Answer 24

Financial Ombudsman Service
- known as UK dispute resolution scheme
- designed to resolve complaints
- funded by levies and case fees
- they can require firms to pay, but must not exceed $430,000.

Question 25

what is the simple checklist regarding right/wrong of behaviors in FS

Answer 25

• open - everyone aware
• honest - does it comply
• transparent - is it clear to parties
• fair

Question 26

what are the conduct rules?

Answer 26

rule 1 - act with integrity
rule 2 - skill, care, diligence
rule 3 - open and cooperative with FCA
rule 4 - fair with customers
rule 5 - observe proper market conduct

Question 27

what is the CISI code of conduct, how many principles are set out?

Answer 27

” members of CISI are imposed to act in a way beyond compliance”
There are 8 principles = Personal accountability, client focus, conflict of interest, respect for MP, professional development, aware of capabilities, respect others and environment, speak up and listen.