Chapter 8 - Financial regulations and professional intergrity Flashcards
What is the role of the government
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
the main purposes of regulation
- Maintain and promote fairness
- promote understanding for public
- provide protection
- minimize crime
- reduce systematic risk
- assist in financial stability
benefits of regulation
- increases confidence and trust
- encourages wealth creation
- reduces market and systematic risk
- enhances consumer protection
- reducing crime
what is the financial policy committee
Established for financial stability by analyzing systematic risk. Has the power to comply-execution only to PRA and FCA to comply recommendations
What is the Prudential regulations authority
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
what is the FCA responsible for
- 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
What are the FCA three primary objectives
- Protect customers
- Enhance integrity
- maintain competiveness
who is responsible for overseeing the FCA
HM treasury
which firms needed to be authorized by the FCA and PRA
Solo-regulated = authorized by FCA
Dual-regulated = authorized by FCA and PRA
what do both FCA and PRA rules state
Act with integrity, skill care, and have adequate financial resources
what does the new customer duty detail in the principles
- act in good faith
- avoid causing harm
- enhance and support retail customers to pursue financial objectives
What is the FCA 6 consumer outcomes
- consumer can be confident
- products designed to meet needs
- clear information
- advice is suitable
- acceptable standards
what is the new customer duty
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
what is money laundering and the stages involved
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.
what is the difference between money laundering and terrorist funding
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
how can fraud affect individuals, what’s the different types
Identity fraud - using misappropriate of the identity, such as documentation
Identity theft - impersonating fraud, misappropriation of their identity, such as passport
who prosecutes companies when bribery occurs?
The serious fraud office
what is insider dealing and the securities associated?
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
what is market abuse and the consequences of it? what does market abuse include?
Behaviors/practices that manipulate financial markets.
consequences = fines, and sanctions.
Market Abuse
- insider dealing
- public disclosure requirements
- market manipulations
who has the FCA enforced for market abuse?
UK Market abuse regulations (UK MAR).
in order to comply with the 2018 data protection act, firms must?
- notify the information to commissioner’s office
- process personal information in accordance
- answer subject-access request from individuals
what to do when data leaks?
MUST report to supervisory authority, and report to individual
what are the requirements for handling complaints?
- notify the complainants of their right to go to the Financial Ombudsman Service
- complaints handling is required to issue final response within 8 weeks.
what is the FOS
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.
what is the simple checklist regarding right/wrong of behaviors in FS
- open - everyone aware
- honest - does it comply
- transparent - is it clear to parties
- fair
what are the conduct rules?
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
what is the CISI code of conduct, how many principles are set out?
” 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.
