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LEVEL 6 Regulation and Compliance > OTHER REGULATED SYSTEMS > Flashcards

OTHER REGULATED SYSTEMS Flashcards

1
Q

Outline the UK Primary Market Functions

A

The FCA is the designated body of UK regulated markets

It must maintain the Official List of companies that are admitted to trading on the Main Market or Official Securities Market of the LSEG

Approving prospectuses

Admitting companies to the Official List - determining those who are able to apply to be listed

Regulating listed companies

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2
Q

What is the LSE made up of?

A

Main markets

Professional securities
- companies raising capital through the issue of specialist debt securities

The AIM Market

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3
Q

What are the three sourcebooks for the Listing Rules?

A

The LISTING RULES which are general rules for listed companies. Apply in entirety to issuers with a premium listing.

The DISCLOSURE AND TRANSPARENCY RULES - providing rules for the dissemination of information, notifications of interests in shares and corporate governance provisions. Apply to premium companies and issuers on prescribed markets such as AIM and ICAP markets

the PROSPECTUS RULES - rules on the context and form of prospectuses, procedures for their approval and exemptions for the requirement of a prospectus

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4
Q

What are the differences between an OFT, a RIE and a MTF?

A

MTFs and OTFs are not recognised as regulated markets

Only non equity instruments can be traded on OTFs

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5
Q

Definition of a REGULATED MARKET

A

‘a multilateral system operated and managed by a market operator, which brings together or facilitates the bringing together of multiple third party buying/selling interests in financial instruments - in the system and in accordance with its non discretionary rules - in a way that results in a contract’

the main market of the LSEG is a regulated market
The AIM market is not a regulated market it is a MTF - regulated by the operator the LSEG

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6
Q

What is a RECOGNISED INVESTMENT EXCHANGE

A

An RIE is an investment exchange which is considered by the FCA to be fit and proper to act as such, and which, although it is subject to FCA supervision and oversight, is not required to be authorised.

THE LSEG is a RIE

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7
Q

WHAT IS A MULTILATERAL TRADING FACILITY?

A

It is a system that

‘brings together multiple parties that are interested in buying and selling financial instruments and enables them to do so. These systems can be operated by an investment firm or a market operator. They may include shares, bonds and derivatives’

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8
Q

What is an organised trading facility?

A

MiFID introduced Organised trading facilities

It is a multilateral system that is not a regulated market or an MTF

Multiple third parties form contracts to buy and sell interests in bonds, structured finance products and emission allowances. Equities are not permitted through an OTF.

The requirements apply to OTFs and their transactions are the same as the requirements for MTFs.

They are subject to the same transparency requirements as regulated markets and MTFs

OTFs are permitted to exercise discretion
1. when deciding to place or retract an order on the OTF they operate
2. when deciding not to match a specific client order with other orders available in the systems at a given time

OTFs are able to engage in matched principal trading in bonds, securities, structured finance products, emission allowances and derivatives

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9
Q

OUTLINE THE LISTING RULES

A

They set out the standards expected of listed issuers

  • details of the enforcement regime
  • the requirements for listing securities together with provisions for premium listing
  • the Listing principles
  • the procedure for application for admission to listing
  • requirements for sponsors
  • obligations for companies and directors
  • requirements for shareholder approval of significant and related party transactions
  • contents of circulars to shareholders
    -requirements for share buy backs
  • specific requirements for OEICs
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10
Q

Following the FSA’s review of the Listing Rules in 2008, what were the changes?

A

Two tiers of listing for all Main Market companies

PREMIUM LISTING - available for equities by commercial companies - for those who want to meet UK equivalent standards

STANDARD LISTING - issuers need to only comply with EU minimum standards. It is available for both UK and overseas commercial equity issuers - NOT available for CEICS or OEICs

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11
Q

What are the Listing Principles?

A

For all companies
PRINCIPLE 1 - Reasonable steps must be made to enable directors to understand their responsibilities and obligations as directors

PRINCIPLE 2 - A listed company must act with integrity towards the holders and potential holders in premium listed securities

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11
Q

What are the listing principles for ‘premium listings’?

A

PRINCIPLE 1 - Reasonable steps must be made to enable directors to understand their responsibilities and obligations as directors

PRINCIPLE 2 - A listed company must act with integrity towards the holders and potential holders in premium listed securities

PRINCIPLE 3 - All equity shares in a class admitted on a premium listing must carry an equal number of votes on any shareholder vote

PRINCIPLE 4 - Where a listed security has more than one class of securities admitted to premium listed, the aggregate voting rights of the securities in each class should be proportionate to the interests

PRINCIPLE 5 - A listed company must ensure that all members of the same class of its listed equity shares that are in the same position respect the rights attaching to the shares

PRINCIPLE 6 - A listed company must communicate information to holders and potential holders of its listed equity shares to avoid creation or continuation of a false market

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11
Q

What are the LISTING REQUIREMENTS FOR THE OFFICIAL LIST?

A
  • Applicants must be duly incorporated in accordance with the law of their place of incorporation
  • Securities must be duly authorised, conform with the law of the country of incorporation
  • When securities of a particular class are admitted to listing , all the securities and further issue must be admitted to listing
  • Securities must be admitted to trading on a RIE
  • Securities must be freely transferable
  • Shares must be paid up and free from liens
  • Market value must be £30 million for shares and £200,000 for debt securities
  • prospectus must be approved by the FCA

Convertible securities may be admitted to listing only if the securities into which they are convertible already or will become at the time - listed securities

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12
Q

Provisions apply to commercial companies on premium listings

A
  • Issuer must have published consolidated audited accounts covering three years
  • at least 75% of the applicants business must be supported by the three year earning record
  • must make a clean working capital statement
  • at least 10% of the trades must be available for public trading
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13
Q

The premium listing category is divided into three categories - what are they?

A
  • commercial company
  • open ended investment companies
  • closed ended investment companies
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14
Q

Outline the Taskforce for Climate-related Financial Disclosures on listing requirements

A

Premium listed companies need to include a statement in their annual financial report setting out whether they have made disclosures consistent with the TCFD

The FCA extended this - after 1 january 2022 - standard listed companies need to in their annual financial report

  • whether they have made disclosures consistent with TCFD
  • if they have not made disclosures consistent with some or all of the TCFD’s recommendations
  • where they have included some or all of their disclosures against the TCFD’s recommendations and recommend disclosures in a document other than their financial report
  • where in their financial report the disclosures can be found
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15
Q

Outline the disclosure and transparency rules

A
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16
Q

Outline the CMA

A

The Competition and Markets Authority promotes competition for the benefit of consumers both within and outside the UK. Its aim is to make markets work well for consumers, business and the economy

It is independent

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17
Q

What is the CMA responsible for?

A
  • investigating mergers that could restrict competition
  • conducting market studies and investigations in markets where there may be competition and consumer problems
  • investigating where there may be breaches of UK prohibitions against anti-competitive arrangements
  • bring criminal proceedings against individuals who commit the cartel offence
  • enforce consumer protection legislation
  • cooperate with sector regulators and encourage them to use their competition powers
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18
Q

Outline the CMA’s annual plan

A

it sees its purpose as to ‘help people, businesses and the UK economy by promoting competitive markets and tackling unfair behaviour’

It is seeking to increase consumer confidence, competitive and fair businesses can compete and thrive, the UK can grow productively and strongly

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19
Q

What does it mean to ‘act in concert’

A

a person or persons acting to obtain or consolidate control of a company or seeking to frustrate the successful outcome of another company’s offer for a company

Control means an interest such as 30% of the voting rights of a company

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20
Q

What do you have to establish to prove you are not acting in concert?

A
  • a company within a group including subsidiaries, parents or associated companies
  • all directors when they believe an offer is imminent
  • a company with all pension funds and the pension funds of any company covered
  • company with any of its directors (including relatives and trusts)
  • The close relatives of a founder of a company to which the code applies
  • a company with all of its directors
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21
Q

What activities are included in dealing?

A
  • Acquisition or disposal of securities
  • taking, granting, acquisition, disposal, termination, closing out securities
  • subscribing to subscribe for securities
  • exercise or converting new or existing securities
  • acquisition, disposal, closing out of any rights under or variation of a derivative
  • any action that may decrease in the number of securities a person is interested
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22
Q

What is an interested party in securities?

A

A person who has economic exposure to changes in the price of securities

They will be treated as having an interest if:
- they own them
- they have the right to exercise control of the voting rights
- for an option/derivative - they have the right or option to acquire or call for the delivery of it
- party to a derivative

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23
Q

what form may an offer announcement take the the form of?

A

Announcing there has been an offer

Announcing there are talks about a potential offer
- must include identity of the potential offeror unless it has been rejected

A ‘no intention to bid’ announcement
- usually triggered by a ‘put up or shut up’ announcement

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24
Q

Difference between Acting in concert in the code and the legal concept

A

legal concept is an agreement between two or more people to acquire interests in shares

The code
- persons who pursuant to an agreement or understanding, cooperate to obtain or consolidate control

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25
Q

What is the difference between a voluntary offer and an announcement offer?

A

Mandatory offer there is no option to have an acceptance level in excess of 50%

Mandatory offer
- cash or cash alternative required
- highest price paid in the last 12 months
Competition and markets referral condition - YES
Offeror and concert parties own more than 50% of voting rights in the offeree

Voluntary offer
- No cash offer except under Rule 11
- highest price paid by the offeror within the last 3 months
- Competition and markets authority referral
- Offeror sets acceptance condition subject to owning more than 50% of the company
-

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26
Q

Rule 9 - Mandatory Offer and its Terms

A

When a person takes their interest in the company to a level of 30% or more of the voting rights or when they consolidate control then they are required under RULE 9 to make a mandatory offer to acquire the rest of the shares

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27
Q

When is a cash offer required for a takeover?

A

when the shares of any class in an offeree company are acquired for cash by an offeror and any person acting in concert with it during the offer period, carrying more than 10% of voting rights in that share class

any interest in shares of any class under offer in the offeree company is acquired for cash by an offeror, or any person acting in concert with it during the offer period, in which case the offer for that class shall be in cash

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28
Q

What are the preconditions in firm offer announcements?

A
  • reaching of an acceptance threshold
  • offeror shareholder approval
  • regulatory approval
  • other bid specific conditions

Minimum acceptance is 50% plus one vote
Unless it is a mandatory offer, the offeror may select a higher alternative acceptance threshold

29
Q

What does Rule 19/20 of the Takeover Rules entail?

A

They ensure information prepared must be prepared with the highest standards of accuracy and must be adequately and fairly presented

Each document document or advertisement must state the directors accept responsibility for the information contained in the document

Under Rule 20

30
Q

Rule 21 of the Takeover Rules

A

Conduct during the offer

The board must not take any action which may result in the offer being frustrated
issue any unauthorised shares or transfer/sell or agree to transfer or sell any shares out of treasury
issue or grant options on unissued shares
enter into contracts otherwise than in the ordinary course of business

31
Q

Outline Defences available to an offeree company

A

They can publish a defence document if they view the offer as hostile
Lobby for referral to the CC

Companies may want to include profit forecasts in a defences document
- there is significant scope for misuse

It must be reported on both by the auditors to the company making the statement and by their financial advisers

32
Q

What is the timeline on an offer for a company?

A

Announcement Day - Offeree now has 28 days to post the offer document and coincides with the Posting Day

Day 14 - First Defence Document
In a recommended offer, the offer document includes a letter by the offeree chairman to the offeree shareholders, setting out a recommendation that shareholders accept the offer.

Day 21 -First Closing Day
An initial offer must be open for at least 21 days following the date on which the offer document is published.

Day 39 - Last Defence Documents
The offeree board is not permitted, unless with the consent of the Panel, to announce any new information or disclose any material new opinions, after Day 39.

Day 42 - Right of Withdrawal
If the offer has not been declared unconditional with regard to acceptances by Day 42 (21 days after the first closing day) then any shareholder who had accepted the original bid may now withdraw their acceptance.

Day 46 Last Offer Amendment
The offeror may amend its offer up to Day 46 of the announcement

DAY 60 THE FINAL DAY
A bid can remain open for up to 60 days. However, if by Day 60 the offer is not unconditional with regard to acceptances, then the bid must lapse, unless an exemption is provided by the Panel.

At Day 60 the offeror must state the total number of acceptances received, together with its own holdings and irrevocable commitments held.

33
Q

What is the Sponsor’s Rule?

A

A company when applying for premium listing must appoint a sponsor to advise it on certain transactions - NOW WITH THE EDINBURGH REFORMS STANDARD COMPANIES WILL NEED TO APPOINT AN ADVISER ON TRANSACTIONS TOO

There is no requirement for the sponsor to be an LSE member firm but it must be a firm approved as a sponsor having adequate experience

Under Rule 8.2 of the Listing Rules, a premier issuer must appoint a sponsor when:
- makes an application for admission of equity shares which require the production of a prospectus
- required to produce a Class 1 circular
- transferring from standard to premium listing

34
Q

What are the principles for sponsors?

A
  • Act with due care and skill
  • if providing guidance to a listed company - must satisfy the listing rules and the DTR
    -must deal with the FCA in an open and cooperative way
  • must take all reasonable steps to identify conflicts of interest that could affect its ability to perform its function properly
  • must put in place effective organisational and administrative arrangements that ensure conflicts of interest do not affect its ability to perform its functions properly
35
Q

What is the role of a Sponsor for a transaction ?

A

Submitting all documents required to the FCA. Submit application for listing.

In compliance with the Principles above, it must submit a conflicts declaration.

The sponsor has specific responsibilities depending on whether it is advising an issuer or an initial listing or a secondary offering

36
Q

New Applications for Listing

A

A sponsor must only apply to the FCA for a listing when it believes the applicant has satisfied the following
- the applicant satisfies requirements of the Listing Rules
- the applicant has satisfied all applicable requirements set out in the Prospectus Rules
- the directors of the applicant have established procedures which provide a reasonable basis for them to make proper judgements as to the financial position and prospects of the applicant

37
Q

Please provide examples of Primary Offerings

A

INITIAL PUBLIC OFFERINGS
- offer for sale
offering shares for sale to institutional and to retail clients
May be a new issue of shares or they may be sold by the company’s existing shareholders. The offer is being coordinated by the investment bank.

  • offer for subscription
    Issuing new shares in response to application for shares. The shares are not in existence in comparison for the offer for sale
  • Intermediaries offer
    Selling to a financial institution such as a stockbroker
  • PLACING
    This is the quickest, cheapest and most certain route open to a company to raise new funds. A company arranges for an investment bank to place blocks of new or existing securities with their investor client base and other institutional contacts.
    This is sometimes referred to as selective marketing, as the new securities are not offered to the wider community of institutional investors.
  • introduction
    Only issued when shares are already widely held. Such as an AIM company wishing to move up to the wider market.
38
Q

EXAMPLES OF SECONDARY OFFERINGS

A

An issuer may seek to raise additional equity through one of the following methods , all of which are referred to as secondary offerings

RIGHTS ISSUE
- When a company offers all its existing shareholders the opportunity to buy further shares in that company in accordance with their pre-emption rights
Shareholders are offered shares pro-rate to their existing holding at a discount to the existing market price.
shareholders may take up the entitlement or sell to third parties at a price reflecting the discount

SECONDARY PLACING
This is where a large block of shares /securities is issued by the company, raising new capital. The company normally engages with an investment firm to handle the placing in the market.

OPEN OFFER
An open offer is also a pre-emptive offer to existing shareholders to subscribe or purchase further shares in proportion to their existing shareholdings. However, unlike a rights issue, an open offer does not give shareholders a right to sell their entitlement to new shares, and the maximum price discount permissible (for listed companies) is 10%.
An open offer also has a shorter timetable.

VENDOR CONSIDERATION PLACING
A way of raising a small amount of money to finance an acquisition. Issues shares to the vendor of an acquisition target as consideration.

39
Q

What must the notification for major holdings to issuer of underlying shares contain?

A

Under the disclosure and transparency rules, the notification must include

  • resulting situation in terms of voting rights
  • chain of controlled undertaking through which voting rights are held
  • the date the threshold was reached
  • the identity of the shareholder
40
Q

What are the ‘class tests’ used for establishing the materiality of a transaction?

A

GROSS ASSETS TEST - Division of gross assets of the transaction target by the gross assets of the listed company - total current assets plus total non-current assets

PROFITS TEST - division of attributable profits of the transaction target by the profits of the listed company

CONSIDERATION TEST - division of the total consideration paid or received by the target, by market capitalisation of the listed company

GROSS CAPITAL TEST - division of the gross capital of the transaction target by the gross capital of the listed company. MARKET CAPITALISATION PLUS ITS NET DEBT

41
Q

GROSS CAPITAL TEST

A

market capitalisation plus net debt

42
Q

For the class tests used to establish the materiality of a transaction, what categories would they then fall into?

A

CLASS 1 - any percentage ratio is 25% or more and this requires shareholder approval

CLASS 2 - the percentage ratio is 5% or more

REVERSE TAKEOVER - any percentage ratio is 100% or more which results in a fundamental change for the business

43
Q

Minimum market capitalisation of admission to the Premium Listing

A

£30 million
£200,00 for debt securities

THREE YEAR REVENUE EARNING TRACKED RECORD
WORKING CAPITAL STATEMENT

44
Q

Minimum market capitalisation for admission for standard listing

A

£30 million
£200,00 for debt securities

45
Q

Minimum market capitalisation on admission on admission

A

No minimum

46
Q

What is the minimum free float needed for premium and standard listing?

A

10%

47
Q

What is the restriction on share dealing for premium listings?

A

Market Conduct

48
Q

Amendments to the Listing Regime

A

The FCA added a new premium listing category for sovereign controlled companies

The FCA proposed to add a new premium listing category for sovereign-controlled companies

49
Q

The existing investor protections common to the premium listing category will apply, with the exception of what?

A
  1. The related party rules will operate on a modified basis: the sovereign controlling shareholder will not be considered a related party for the purposes of the UK Listing Rules.
  2. The controlling shareholder rules will not apply to companies in the ‘new’ category in respect of the sovereign controlling shareholder.
50
Q

What is the ‘new category’ for following investor protections for sovereign controlled companies:

A
  • a new requirement for a new applicant to have an audited three year revenue
  • a requirement that the company’s application is supported by a sponsor firm
  • a requirement that the working capital statement is not qualified
  • controlling shareholder provisions in respect of such shareholders
51
Q

When is a prospectus required?

A

2019 - Prospectus Regulation replaced the Prospectus Directive.
The Regulation builds upon the aims of the Directive providing for a single prospectus regime.

When transferable securities are offered to the public they need to have a prospectus.
Applies to both primary and secondary offerings with an offering of a value of 8 million euros or more

52
Q

When is a prospectus not required?

A
  • the offer of securities whose denomination per unit is less than 10,000 euros
  • when an offer is only made to qualified investors or fewer to 150 persons in the UK other than qualified investors
  • non-equity securities issued in a continuous or repeated manner by a credit institution
  • securities offered to existing or former directors/employees provided the document is made available to the public
53
Q

What are Qualified investors?

A
  • firms which are authorised to operate in the capital markets
  • large companies
  • small to medium companies which have self-certified themselves as being qualified investors
  • private individuals who have self-certified themselves as being sufficiently knowledgeable
54
Q

What is the interaction between the prospectus and the financial promotion rules?

A

when a company is considering a primary or secondary offering of shares, it must consider whether a prospectus is required.

There are a wide range of exemptions available and if the company can benefit from one or more of these exemptions then it need not produce a prospectus

A company seeking admission to AIM, for instance, but does not market its shares widely may take advantage of the private placement exemption

A prospectus which has been approved by the FCA in accordance with the provisions of FSMA and the Prospectus Rules, may be distributed widely, without restriction in the UK. When a company has determined that no prospectus is required for its share offering, it must still consider whether it has any obligations under the Financial Promotions regime.

A company offering transferable securities to the public may have to produce and have approved a prospectus
If exemptions are available a company will have to consider whether they are available or not

A prospectus must not be circulated until it has been approved by the FCA - part 6 of FSMA

55
Q

What is the 10 DAY DOCUMENTS?

A

When the FCA decides the prospectus does not meet the requirements, it will advise the issuer or person asking for that admission of the information that is needed

This information is known as the ten day documents

This includes
- draft prospectus and cover
- request for authorisation
- checklist cross-refering the draft prospectus contents to the requirements of the Prospectus requirements
- application forms to acquire or subscribe for shares
- copies of board resolution allotting the securities

56
Q

What needs to be in a prospectus?

A

It contains key information that investors need in order to understand the nature and risk of the issuer
- briefly in non-technical language

It must be fair, clear and not-misleading

Be made up of four parts:
- an introduction containing warnings
- key information on the issuer
- key information on the securities
- key information on the offer of securities to the public

REGISTRATION CONTENT
- contains general information about the issue and the issuer

SECURITIES NOTE
- contains detailed information about the equity or the non-equities being offered
- Each part may be produced and approved by the FCA seperately as a tripartite prospectus

57
Q

In the case of an offer of a class of shares not already admitted to trading that is to be admitted to trading for the first time - when does a prospectus need to be made available?

A

At least 6 working days before the end of an offer

The text and the format of the prospectus made available to the public must, at all times, be identical to the original version approved by the FCA. All prospectuses must be publicly available in electronic format for at least ten years after their publication on the website referred to above.

58
Q

What is the MODEL CODE?

A

The UK’s Model Code contains the requirements and restrictions placed on directors of listed companies in respect of dealings in the company
But this was deleted as it was not compatible with MAR

59
Q

What are PMDRs

A

Persons discharging managerial responsibilities
- captures senior management who are not directors but have roles which direct and manage the company on a daily basis and can have a big impact on the companies success

also includes CAPs - closely managed persons

Three working days from a transaction - the PDMR or CAP dealing, the issuer has two working days from being notified to report to the market

disclosure must be made using a specific template

60
Q

When is a transaction by a PMDR/CAP not required?

A

when the financial instrument:

  • investment in a unit/share in a collective investment undertaking which exposure to the issuer’s shares or debt instrument does not exceed 20% of the assets
  • provides exposure to a portfolio of assets in which the exposure to the issuer’s shares or debt instruments does not exceed 20% of the portfolio’s assets
  • is a unit/share in a collective investment scheme or provides exposure to a portfolio of assets and the PDMR/CAP does not know the investment composition or exposure in relation to the issuer’s share/debt instruments
61
Q

What are the proposed changes to the listing regime?

A

Proposed to get rid of the dual-class structures
- standard segments are not allowed to be listed on the FTSE 100. It will help companies compete for listings in New York and Amsterdam

Shareholder notification when a class test indicates a Class 1 Transaction will no longer be required
The profits test will be dropped from the class tests as it produces anamolous results. Even though investors may lose some protections, it will help companies to compete with other bidders for assets

A company will not be required to
- demonstrate a three year earning revenue
- ensure the company’s financial information covers 75% of the business
- producing a working capital statement

dropping the three year requirement will allow companies to consider listing at an earlier stage, particularly where the business model is based on building out a product or platform

Dropping historical requirement to ensure 75% of the business is covered will make the path easier for companies that have increased their size due to acquisitions

62
Q

What is the UK MARs prohibition on PDMRs?

A

PMDRs conducting any transactions on their accounts or for an account of a third party during a ‘closed period’

It covers 30 days before the publication of an interim financial report or a year end report

63
Q

What are the 6 UK BMR groups

A
  • critical benchmarks - value of the contracts is at least 500 billion or benchmark is deemed critical in a member state
  • significant benchmarks
  • commodity benchmarks
  • regulated data benchmarks - data is provided by regulated venues
  • interest rate benchmarks
  • non-significant benchmarks - value of contracts underlying the benchmark is less than 50 million euros
64
Q

When will a firm be a benchmark administrator?

A

If a firm provides indices that are used in:

  • financial instruments traded on a trading venue via systematic internalisers in the EU
  • mortgage or consumer credit contracts
  • investment funds

UK firms are prohibited from ‘using’ indices as a benchmark unless they are produced by an independent administrator included on the UK register of administrators authorised or registered under the Regulation or in an approved third country

65
Q

How are supervised entities in the UK able to use benchmarks produced by third country administrators?

A

EQUIVALENCE - where an equivalent decision has been approved

RECOGNITION - where administrator in a third country has been recognised

ENDORSEMENT - where an administrator or supervised entity located in the EU with a clear and welldefined role within the control or accountability framework of a third-country administrator and is able to monitor effectively the provision of a benchmark,

66
Q

what is the CLIMATE FINANCIAL RISK FORUM

A

The Climate Financial Risk Forum’s (CFRF) aim is to develop practical tools and approaches to address climate-related financial risks.

to build capacity and share best practice across financial regulators and industries to advance the financial services sector’s responses to financial risks from climate change

chaired by individuals from the PRA and the FCA
scheduled to meet three times a year

industry-led forum, bringing together senior representatives from across the financial sector to produce practical tools and recommendations for firms in response to climate-related financial risks and capturing the opportunities arising from climate change

67
Q

CLIMATE FINANCIAL RISK FORUM

A

It contains four industry produced chapters:

RISK MANAGEMENT
- appropriately embedding climate-related financial risk

SCENARIO ANALYSIS
- appropriately modelling and considering a range of potential futures

DISCLOSURES
- making effective climate-related financial disclosures

INNOVATION
- By developing novel products a firm can adapt its business to respond to the potential impacts of climate change
- developing new investment vehicles
- working to be carbon net zero

68
Q

What are the five working groups of the Climate Financial Risk Forum?

A

RISK MANAGEMENT
- designed to help retail banks, corporate banks and asset managers to produce and implement risk appetites

SCENARIO ANALYSIS
- practical example on how firms can incorporate sector specific points

DISCLOSURE
- collate a number of case studies from various organisations that will be relevant to firms

INNOVATION
Focused on identifying and sharing practical opportunities to mobilise financial capital:
– to push/direct an economy-wide transition to meet climate targets and the resultant briefing paper highlights the key points.

69
Q

FCA ESG STRATEGY

A

TRANSPARENCY
- promoting transparency on climate change

TRUST
- building trust and integrity in ESG-labelled instruments

TOOLS
- working with others to enhance industry capabilities

TRANSITION
- support the role of finance in delivering a market-led transition

TEAM
- developing strategies, structures to support the integration of ESG

70
Q

FCA Sustainability Disclosure Requirements and Investment Labels

A

October 2022 the FCA published a consultation paper on sustainability disclosure requirements

It was proposed to advance market transparency and reduce greenwashing

Only relevant to UK funds and portfolio managed services in the UK

ESG proposals are to advance the strategic objective and make markets function well

71
Q

What does the FCA’s consultation paper on ESG cover?

A

paper objectives part of the UK Governments GREEN FINANCING ROADMAP

  • Sustainable investment labels
    • sustainable focus
    • sustainable impact
    • sustainable improvers

Detailed disclosures at a wider audience
- pre-contractual disclosures
- ongoing sustainability related performance information

NAMING AND MARKETING RULES restricting the use of certain sustainable terms for product and marketing rules
- requirements for distributors to ensure product level information is made available to consumers

Ongoing sustainability related performance metrics
- For the data, firms will use the TCFD disclosures still
- firms should not use data where there are material gaps in the data

ANTI-GREENWASHING RULE - all firms claims of sustainability need to be fair, clear and not misleading

LEVEL 6 Regulation and Compliance (17 decks)

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