Glossary Flashcards
Allocation
The division of a single aggregated order between two or more investors’ accounts
Alternative Trading Systems (ATS)
Term formerly used for a facility provided by authorised firms to allows for multilateral trading, by bringing together buyers and sellers of securities. From 01/11/07 ATSs were authorised as multilateral trading facilities
American Depositary Receipt (ADR)
A negotiable instrument representing rights to a block of shares in (generally) a non-US company, traded on a US exchange. The ADR is an acknowledgement from a bank or trust that the block of shares is held by it. ADRs are a means for non-US companies to have their shares traded in the US
Ancillary Services Activities
an activity which is not a regulated activity but which is:
(a) carried on in connection with a regulated activity; or
(b) held out as being for the purposes of a regulated activity.
Such as giving advice on MiFID instruments, which are only passportable if the firm is already passported in relation to a core investment service or activity, such as dealing and if the firm is providing those services as ancillary services to that activity.
Appointed Representative
An individual or organisation carrying out regulated activities on behalf of an authorised firm under contract The authorised person must have accepted responsibility in writing for the conduct of these regulated activities
Approved Persons
Individuals approved by the FCA to undertake controlled functions. They must comply with the FCA’s Statements of Principle and Code of Practice for Approved Persons
Authorisation
The FSMA requires firms to obtain authorisation before undertaking investment business. This is gained by receiving one or more Part 4 permissions from the FCA
Bank of England
UK’s central bank. Acts as the government’s banker and determines interest rates via its monetary policy committee (MPC). IS responsible for the stability of the financial system through the PRA
Best Execution
Requires firms to look at many factors when determining the means of obtaining the best outcome for a client when executing a deal. Includes:
1) Price Factors
2) Speed
3) Likelihood of execution and settlement
4) Size and nature of the deal
Bribery Act
2010 Law applicable to all commercial organisations. Offence to offer or take bribes or negligently prevent bribery. Can be a defence for a firm if it proves it has adequate measures to prevent this conduct from person’s associated with it
Capital Requirements Directive (CRD)
EU directive setting out financial rules for investment firms. Came into force on 01/01/07 and applies to banks, building societies and most investment firms. implemented by the FCA in the UK through the General Prudential Sourcsbook (GENPRU) and the Prudential Sourcebooks for Banks, Building Societies and Investment Firms (BIPRU) The aim of the CRD is to ensure firms hold adequate financial resources and have adequate systems and controls to prudentially manage the business and risks.
Chinese Walls
Organisational barriers to the flow of information set up in large firms. These prevent the movement of confidential, sensitive information between departments and manage potential conflicts on interest
Churning / Switching
Excessive trading by a broker in order to generate commission, regardless of the interest of the customer
Client
Individuals or firms conducting business through an authorised person. Either a customer (retail or professional) or an eligible counterparty (ECP)
Code of Practice for Approved Persons
FCA code about the behaviour of approved persons. Compliance with the code indicates whether or not an approved person is in compliance with the Statements of Principle for Approved Persons
Common-Platform Firm
Broadly, a firm that is subject to MiFID or the CRD, and so subject to the common platform of organisational systems and controls
Competition and Markets Authority (CMA)
Independent body that investigates mergers and acquisitions and other anti-competitive situations, to establish whether they will have an adverse effect on competition within a particular UK market
Conduct of Business (COBS) Rules
FCA rules under the financial services and markets act 2000, dealing with the relationship between an authorised firm and its clients
Contract for Difference
Investment instrument consisting of a contract - parties hope to make a profit by reference to the movement in the price of an underlying asset, which does not change hands
Contracts of Insurance
Financial products specified by Part 3 of the Regulated Activities Order (RAO). 2 Sub Divisions:
1) General insurance contracts
2) Long term insurance contracts
Controlled Functions
Roles within authorised firms where the FCA requires the occupant to be approved
Criminal Justice Act 1993 (CJA)
A substantial act which includes provisions relating to insider dealing, including a definition of that offence
Customer/Client Due Diligence
The Money Laundering Regulations 2017 and the FCA rules require firms to take sufficient steps to identify a client.
Customer Function
The controlled function conducted by person’s who interact with a firm’s customers, such as an investment manager or advisor
Debt Securities
Securities where the issuer acknowledges a loan made to it. Includes: Bonds, Certificates of Deposit and Commercial Paper
Dematerialised
Term used to describe stock held in an electronic form
Depositary Receipts
Negotiable instruments evidencing rights over a block of shares held with a depositary - usually a bank or trust company. ADRs are a good example. Depositary Receipts are designated investment instruments under FSMA
Designated Investment Business (DIB)
Some regulated activities are designated investment business, giving rise to additional obligations under COBS. Including mainstream investment business, excludes business like deposit taking, mortgage business and funeral plans
Designated Investment Exchange (DIE)
Overseas exchange designated by the FCA as meeting certain standards of investor protection in terms of market efficiency, transparency and liquidity
Designated Professional Body (DPB)
Professional bodies whose members ca carry on limited financial services business without the need for FCA authorisation, providing these services are incidental to their main business. Bodies for: Lawyers, Accountants, Chartered Surveyors, Licensed Conveyancers and Actuaries
Disclosure Guidance and Transparency Rules (DTRs)
the DTRs in the FCA handbook implement the requirements of the Market Abuse and Transparency directives and provide rules for the management and dissemination of information for listed companies, for the publication of financial statements and for the disclosure of significant shareholdings
Euroclear UK & Ireland
A recognised clearing house, UK org that facilitates the clearing and settlement of trades in UK and Irish company shares, particularly in dematerialised form
European Economic Area (EEA)
28 member states of the EU, plus Ireland, Lichenstein and Norway
European Securities and Markets Authority (ESMA)
European body responsible for the regulation of investment firms and markets, directly responsible for the regulation of credit rating agencies
European Supervisory Authorities (ESAs)
2011 Pan-European financial services regulatory bodies, each covering a different financial sector. 3 ESAs are:
1) Europea n Securities and Markets Authority (ESMA)
2) the European Banking Authority (EBA)
3) European Insurance and Occupational Pensions Authority (EIOPA)
European Union (EU) Directives
Legislation issued by the EU to member states requiring them to enact and implement local legislation
Exempt Persons
Firms or Persons exempt from the requirement to be authorised to carry on regulated activities. Term includes bodies such as recognised investment exchanges (RIEs) and recognised clearing houses (RCHs)
FCA Handbook
Document containing FCA rules with which authorised firms must comply. Handbook is separated into separate sourcebook covering different subjects
Financial Conduct Authority (FCA)
from Apr 2013 - the regulatory body responsible for regulating the conduct of business and markets and for authorising firms not authorised by the PRA. Under EU regulations each state must appoint a competent authority for the purpose of listening securities. This is the FCA for the UK, through its UK Listing Authority department.
Financial Policy Committee (FPC)
A new body within the BoE. From 01/04/2013 is responsible for macroprudential regulation
Financial Services Act of 2012
The act that created the FCA, PRA and FPC to act as new regulators
Financial Services and Markets Act 2000 (FSMA)
Legislation that established the financial regulator (FSA) and empowered it to regulate the financial services industry. The FSA was split in Apr 2013: FCA looks after conduct issues and the PRA looks after prudential issues
Financial Services and Markets Tribunal
Est by the FSA as an independent body to hear appeals against the FSA’s, and now the FCA’s, disciplinary decisions. Run by the Gov’s ministry of justice. Abolished in April 2010 and replaced by the Tax and Chancery Chamber of the Upper Tribunal
Financial Services Authority (FSA)
The agency created by FSMA to be the single financial regulator in the UK. Replaced by the FCA in Apr 2013, with certain functions transferred to the PRA
Fixed Portfolio Firm
FCA category of regulatory supervision that applies to the majority of firms, which involves market-based thematic work and programmes of communication, engagement and education
Flexible Portfolio Firm
FCA category of regulatory supervision that applies to the majority of firms, which involves market-based thematic work and programmes of communication, engagement and education
Future
A futures contract, a legally binding arrangement where parties commit to buy/sell a standard quantity and (is applicable) quality of an asset from/to another party on a specified date in the future, but at a price agreed today. Because the price is agreed at the outset, the seller is protected from a fall in the price of the underlying asset in the intervening period
Her Majesty’s Revenue & Customs (HMRC)
Gov department responsible for formulating and implementing the Gov’s financial and economic policies. Among other things, this means it is responsible for financial services regulation in the UK. FCA is accountable to HMT.
Home State
Term used for the EU country where a financial services firm conducting cross-border business is based
Host State
Term used for an EU country where a financial services firm is doing business, but not based there
ICE Futures Europe
1 of 6 recognised investment exchanges. Incorporates the operations of 2 long-standing London-based exchanges:
1) The International Petroleum Exchange (IPE)
2) London International Financial Futures Exchange (LIFFE)
Deals in the futures for energy products, such as crude oil and gas, and also in instruments such as carbon emission allowances. IT offers derivative contracts in a wide range of energy, commodity and financial products
Inside information
Information relating to a security, or issuer, which is not publically known and would affect the price of a security if it was
Insider Dealing
One of several offences created under the Criminal Justice Act (CJA) which may be committed by an insider in possession of unpublished price-sensitive information if they attempt to deal in affected securities, encourages others to deal or passes the information on
Integration
The 3rd stage of money laundering, integration is the stage at which the laundered
Joint Money Laundering Steering Group (JMLSG)
A group whose membership is made up of 15 trade bodies in the financial services sector. the JMLSG has published guidance notes which establish how firms should interpret and implement the money laundering regulations
Lamfalussy Process
4 stage process for introducing and implementing European directives and regulations under the financial services action plan
Layering
The 2nd stage of money laundering, in which money or assets are typically passed through a series of transactions to obscure their origin
LCH
An indepdent clearing course acting as central counterparty (CCP) for trades executed on Euronext.NYSE, and for certain trades executed on the LSE. It is recognised as a clearing house
Listing Rules
Contained in the FCA Handbook, provides the rules for the London Stock Exchange (LSE) main market and other listed companies, includes criteria for listing, processes, documentation and continuing obligations. Listing rules based on principles which take into account interests of listed entities, maintenance of investor protection and the need to protect the reputation of the market
London Metal Exchange (LME)
Market for trading contracts in base metals and some plastics. A recognised investment exchange (RIE)
London Stock Exchange (LSE)
Dominant UK market for trading in securities, especially shares and bonds. LSE is a recognised investment exchange (RIE)
Market Abuse
A civil offence, under MAR, that judges the behaviour of what a reasonable investor would view as a failure to observe market standards. Offences include abuse of information, misleading the market and distortion of the market
Market Maker
A firm that quotes bid and offer prices for a named list of securities n the market. Such a firm is usually under an obligation to make a price in any security for which it is market maker, at all times
Markets in Financial Instruments Directive (MiFID)
An EU directive which replaced the Investment Services directive (IDS) on 01/11/2007. IT allows firms authorised in one member state to offer/provide financial services to customers in another. Being refined and expanded with the introduction of MiFID 2, which came into force in the UK 03/01/2018
