IMC II Flashcards
Appropriateness needs to be assessed for…
non-advisory services in complex products (=derivatives and warrants)
3 Pillars of FCA Supervision
Firm systematic, Even Driven & Issues and Products
Exempt from Authorisation?
Lloyds Syndicate Members, Appointed Representatives, Designated Professional Bodies and Recognised Exchange and Clearing Houses
Penalty for breaking general prohebition
2 years prison & unlimited fine
MiFID Professional Client
2/3 of
* Balance sheet €20mn
* Net Turnover €40mn
* Own funds €2mn
Professional Client Non-MiFID
*company or LLP with called up share capital of at least £5mn OR
(2/3)
* Balance Sheet 12.5mn
* Net Turnover 25mn
* 250 average n.o. employees
Always Professional Clients
- Insti Investor whose main activity = invest in financial instruments
- National or regional government, Central bank, international or supernational institution
- Organisations required to be regulated or authorised to operate in financial markets
For a merger to qualify for further investigation any of these must happen
- The combined enterprise more than 25% of market share
- Turnover of acquired entity exceeds £70mn
- Any other substantial lessening of competition
Must not provide a suitability report for a retail client when selling
UK gov bonds
Suitability report must be sent to client when for pensions?
no later than 14 days after contract is concluded
Suitability report must be sent to client when for life policy?
before contract is concluded
High net-worth individual
Income over £100,000 per year and/or net investible assets of at least £250,000
How often does periodic statements need to be provided for retail clients?
Every 6 months, or 3 if requested
Remittance Basis Charge - how much and when paid?
If UK resident for 7/9 last years if they choose to have their oversea income taxed on a remittance basis. £30,000 per year. If 12/14 years then £60,000
When can no longer use remittance basis?
From the 16th/20 years
Max tax relief of pension contributions per year?
40k, can be carried over for 3 years
Taxation for Trusts
First £1000 = taxed at basic rate, Above £1000 = taxed at additional rate
How are bare trusts taxed?
The tax is paid at the beneficiaries margin. Liable on trust assets irrespective of whether income is paid out or not
CGT Allowance
12,300 per year, use it or lose it
No capital gains tax on?
- Bonds that pay coupon including gilts, corporate bonds etc.
- Primary residence
- Shares in enterprise investment fund schemes
Chargeable lifetime transfers
20%
Inheritance tax exemption
3000 per year, if unused can be carried forward one year
Inheritance tax % above nil band
40%
VAT is exempt for what stockbroker service?
Execution Only
EIS, OEIC, GIPS
x
LSE Market Makers must
Quote continuous bid and offer prices & indicate a maximum number of shares they will trade
When are prospectuses required?
When issuing new shares to the public, not required for script issues or for issues up to 150 people in the UK
What is a Eurobond
A security where the currency of the bond and the country of issue are different. Interest is paid gross of withholding tax
Who must you report dealings in Eurobonds to?
ICMA
Main derivative exchange in the UK?
ICE Futures Europe
What does acting as principal mean?
Firs is taking a position “running a book” to make a turn on the trade ex. buy low sell high
What are OTC contracts
One-to-one agreements where the contract is completely flexible and non-standardised
Benefit to OTC trading
When hedging, the contract can be tailored to this without needing to be continuously rebalanced. Less stringent regulation
EMIR Imposes what 3 requirements, on whom?
On those who trade OTC derivatives:
1. To clear through a central counter party
2. To put in place risk management for those OTC derivs that are not centrally cleared
3. Report derivatives to a trade repository
What type of system does CREST operate?
Delivery vs. payment
What is clearing? Benefits?
Sn organisation becomes counterparty to both buyer and seller of the trade, guaranteeing settlement and eliminating default risk. Also promotes anonymity. Process known as novation.
Counterparty risk
The risk that once a contract has been agreed, at least one of the parties will not meet their obligations
How is counterparty risk typically managed?
By a clearing house acting as a central counterparty
