Questions which don't understand from book Flashcards
What are the conditions for a premium stock exchange listing?
- Three years of of audited accounts
- Expected aggregate market value of at least £30m for shares (£200,000 for debt securities)
- 10% of listed shares must be held by the public
Which entity is responsible for considering applications by a company for its shares to be listed?
The UK listing authority is a function of the FCA
Which entity regulates AIM?
The UKLA regulates the full list. LSE regulates AIM
Requirements for listing on LSE’s high growth segment (HGS)?
- CAGR at least 20%
- Must be incorporated in EEA
- Minimum free float of 10% at IPO
- Historic revenue CAGR of 20% over three years
Requirement for AQSE growth market?
- 24 months audited accounts
- 10% free float
What is Section 172?
Requires a director to act in the way they consider would be most likely to promote the success of the company for the benefit of its members as a whole
What is groupthink?
Behaviour that minimises conflicts and results in consensus decision making
Board diversity targets
- Hampton-Alexander - voluntary target of 33% women in FTSE 350
- Parker review - all FTSE 100 boards have at least one ethnic director
Which instruments does MiFID cover?
Came in on 3rd Jan 2018 and added one additional financial instrument to the list contained in the original MiFID. The following are MiFID II instruments:
1. transferable securities; money market instruments and units in collective investment
2. options, futures, swaps, forward rate agreements and other derivative agreements
3. derivatives relating to commodities
4. derivative instruments for transfer of credit risk
5. financial contracts for differences
6. derivatives relating to climatic variables
Are contracts of insurance covered under MiFID?
No. Firms that do not conduct investment services at all are not within the scope of MiFID
Which does the EMIR comprise a set of standards for?
The regulation of OTC derivatives, central counterparites and trade repositories. EMIR introduced new requirements to improve transparency and reduce risks of derivatives
Which of these require authorisation?
1. Arranging deals and investments
2. Establishing a collective investment scheme
3. Sending dematerialised instructions
Undertaking any regulated activity requires authorisation unless exempt from authorisation
Which of these constitute a regulated activity as defined bby the Financial Services and Markets Act 2000?
1. Provision of investment advice
2. Fund management
3. Acting as an unremunerated trustee
Investment advice and fund management are whereas acting as an unremunerated trustee is excluded
Which of the following are exempt from authorisation?
1. Members of a recognised investment exchange
2. Appointed representatives
3. Lenders of regulated mortgages
Only the RIE such as the LSE is exempt, not the members. Therefore appointed representatives are the only exempt
Are currencies specified under the FSMA 2000?
No, currencies themselves are not specified investments, only currency futures and options
Why is this not correct? : The Trustee Act 2000 widened the investment powers of trustees, thus overriding provisions included in the trust instrument
Restrictions in the trust deed will override the wider investment powers provided for in the Trustee Act
What is the main rationale for enabling the FCA to make product intervention rules that are temporary?
The power to make temporary rules, without the normal consultations, can be used if the FCA considers that the delay involved in complying with the requirement would be prejudicial to the interests of consumers
What are the requirements for a MiFID business?
Must have two of the following:
1. €20 million balance sheet total
2. €40 million net turnover
3. €2 million own funds
When can the FCA not exercise its power to make temporary product intervention rules (TPIRs)?
The TPIRs may only last for up to 12 months. They may be used where complex or nice products are sold to mass market. There is no requirement for the FCA to consult the PRA regarding TPIRs
Under the EU benchmark regulation you may be a benchmark administrator if you provide indices that are used in:
- Financial instruments traded on an EU trading venue
- Mortgage contracts
- Investment funds
Does MiFIR cover more assets than MiFID II?
Yes. It sets out a number of reporting requirements in relation to the disclosure of trade data to the public and competent authorities. MiFID’s scope is extending under MiFIR to cover more asset classes, so more firms will be caught by the reporting obligations
What was introduced under UCITS V?
Enhanced the rules on responsibilities of depositaries and introduced remuneration policy requirements for UCITS fund managers. Implemented in March 2016.
What are the key changes that MiFID II has introduced?
- A regulated OTF to capture unregulated trades
- Strengthening transparency requirements that apply before and after trades
- Limiting the size of positions held in commodity derivatives to reduce speculation in basic products
When was MAR introduced?
July 2016. Was first introduced in July 2005 implementing the Market Abuse Directive
Changes that MAR brought about
- Extending the scope of the EU market abuse regime to financial instruments traded on MTFs or other OTFs and certain OTC activities
- Extends the market abuse regime to cover behaviour both within and outside the EU in relation to instruments admitted to trading on an EU trading venue
- Prohibition on attempting to engage in market manipulation
What is true of an OTF?
Designed to capture trading on bonds and derivatives that would not be traded on organised markets or MTFs
The seven criteria the FCA sets out that firms must consider
- Quality of service (not speed)
- The range and quality of services provided to investors
- Fund performance
- AFM costs
- Economies of scale
- Comparable market rates
- Comparable services and classes of units
Maximum sanction for assisting a money launderer?
14 years imprisonment and unlimited fine
Blocks
- High level
- Prudential
- Business standards
- Regulstory supervision
- Complaints and redress
- Specialist sourcebooks
- Listing, prospectus, disclosure
8.
PRIN 1
- Integrity
- Skill, care, diligence
- Management and control
- Financial prudence
- Market conduct
- Client interest
- Client communication
- Conflict of interest
- Consumer trust
- Client assets
- Relationship with regulators
Income allowance and condition
12,570 under 100,000
Basic income tax
0-37.7k
Higher income tax
37,701-150k
Additional tax rate
> 150,000
When is there no personal allowance?
Income >125,140
Income tax rates
Basic - 20%, higher - 40%, additional - 45%
Basic savings allowance
1k allowance - 20% rate
Higher savings allowance
£500 - 40%
Additional savings allowance
£0 - 45%
CG allowance
£12,300
Basic and higher CG
10% and 20%
Insider dealing - magistrate
Criminal justice act 1993. 5k fine. 6m in jail
Insider dealing - crown court
Unlimited fine, 7 years jail
Misleading statements
Financial services act 2012
1. Magistrate: 5k fine 6months
2. Crown court: unlimited fine and 7yrs
Money laundering: conceal, acquire, assist prison
14 years
Failure to report ML
5 years
Tipping off ML
2 years
Misleading statements ML
2 years
Not complying with ML
2 years
ML regs
Proceeds of Crime 2002 and Serious organised crime and police act
Bribery act fine and prison
UK bribery 2010. Unlimited fine and 10 yrs
Record keeping for all ML
5 yrs
Market abuse regulation and fine
EU MAR and unlimited
MiFID record keeping
5 years
Non-MiFID business record keeping
3 years
Pension transfer record keeping
Indefinite
Life policy/pension scheme record keeping
5 years
Broker/research fees record keeping
5 years
MiFID/3rd country business record keeping
5 years
Financial promotion for pension/life policy record keeping
6 years
General prohibition act, fine, prison
FSMA, unlimited fine and 2 years
Financial promotions act, fine, prison
FSMA, unlimited fine and 2 years
Client assets record keeping
5 years
MIFiD complaints record keeping
5 years
Non MiFID record keeping
3 years
Tax returns record keeping
6 years
What is switching and churning?
When a firm is overtrading investments such as securities too frequently within a client’s account, with no benefit, this is churning. Switching is overtrading within and between packaged products
Maximum jail sentence for insider dealing offences
7 years under the Criminal Justice Act 1993
Are there any regulatory requirements with regard to fact find?
No
Non MiFID per se professional requirement?
Large undertaking such a corporate body that has called up share capital of at least £5m
Who and why was NEST setup?
The government setup National Employment Savings Trust so that all employers have access to a suitable pension scheme if they do not have a quality scheme in place
Give details of NEST
All eligible jobholders (between 22 and state pension age with annual earnings over 10k) can be enrolled. Transfers in and out are not allowed except in limited circumstances.
What is a good way of establishing affordability of a mortgage?
Prepare a cashflow analysis, which can be in the form of an analysis of monthly household income and outgoings
The test for professional clients when carrying out non-MiFID business
Requires two of the following:
1. €12,500,000 balance sheet total
2. €25,000,000 net turnover
3. 250 average number of employees in the year
Client quantitative test
Must satisfy two of the three:
1. The client has carried at least ten significant transactions per quarter on the relevant market in last four quarters
2. Client’s portfolio exceeds €500.000
3. Client has knowledge of the transactions envisaged from at least one year’s professional work in financial sector
Describe the money laundering process (placement, layering and integration)
Placement usually involves a deposit-taking institution such as a bank or building society. Investment businesses are more likely to find that they are used in the second and third stages: layering and integration
Who gains from the performance of the assets held in a discretionary trust?
The beneficiary gains for the assets held in a discretionary trust. The trust property is held for the benefit of the benficiaries and the trustees have discretion about how much to give which beneficiaries and when
What is required for a prospectus issued by a listed company?
- Prospectus must be made public
- Prospectus must be approved by the UKLA
What are the gifts with reservation rules?
They mean that if a transfer of legal ownership of an asset takes place, but the original owner still remains some rights with regards to that assett then for purposes of IHT, the transfer will be deemed not to have taken place
A pension fund’s statement of investment principles (SIPs) is the responsibility of?
The trustees
pen
With respect to a defined benefit pension fund, who is responsible for preparing the statement of funding principles?
The trustee
MiFID business requirements
Two of the three:
1. €12,500,000 balance sheet
2. €25,000,000 net turnover
3. 250 average number of employees
Alternatively can have called up share capital of at least £5,000,000
Cold call restrictions in terms of products which can be sold
Firms are restricted in what they can sell through cold calls. They are permitted for generally marketed packaged products. A firm must not make a cold call regarding a higher volatility fund, or a life policy linked to a higher volatility fund.
Is custody covered by the regulated activity?
Yes custody is covered by the regulated activity of safeguarding and administration of assets but is not one of the threshold conditions
Why is a disclaimer not appropriate to ensure compliance with anti-bribery legislation?
Likely to be ineffective and does not form part of adequate procedures as required by the anti bribery legislation
According to the UKLA, what is the minimum market capitalisation for a listed company on issue of equity?
At least £30,000,000/
When do rules apply outside the UK in relation to financial promotions?
When they are cold calls
Permission of cold calls
Cold calls are permitted for both SIPPs and stakeholder pension plans (packaged products). Although there is no regulation, they should be made at an appropriate time of the day. Calls between 9-10pm at weekends could be considered inappropriate. Cold calls are permitted for both life policies and investment trust savings plans (packaged plans)
What is a direct offer financial promotion?
Must contain appropriate disclosures and for non-MiFID business additional information so that the client is reasonably able to understand the risks and make investment decisions on an informed basis
What are two routes into authorisation under FSMA 2000?
- Permission from the FCA
- Authorisation to carry out investment business in a member state of the EU
What is true about periodic statements?
- Must include the name/designation of a retail client’s account
- For a retail client, they are required semi-annually for a securities portfolio
What is the purpose of a probate?
Executors need to obtain a Grant of Probate from the Probate Registry to show they are entitled to administer the estate. Probate is the process that occurs after someone has died, to administer their estate, collect debts and pay any tax due before the assets are distributed
What is the maximum sentence for failing to report suspicions of ML?
Under POCA 2002, is punishable with 5 years prison and unlimited fine
Which of the following are packaged products?
1. Life policies
2. Units in a regulated CIS
3. Structured capital at risk products (SCARPs)
SCARPs are incuded as retail investment products but are not packaged products. RIPs are wider than packaged products. Packaged products include: collective investment schemes, life policies, personal pensions and stakeholder personal pensions
Is a suitability report needed for basic advice?
No, a suitability report is not required in the case of the basic level of advice on stakeholder products
Who is a basic written agreement always required for?
Only required by the regulator for a retail client
Give three types of specified investments?
Bonds, shares, and options on shares
Which criteria would a firm consider when looking to test fitness and propriety of an individual?
- Honest, integrity and reputation
- Competence and capability
What is an example of an exemption set out in the Financial Promotions Order?
Financial promotions communicated only to members of the designated professional bodies
Can the FCA exted its investigation beyond the regulated activities of the firm?
Yes
Where a release is lengthy, prominence must be given to
Current and future trading prospects
What is the main area of responsibility for the FPC?
Macro-prudential policy
What are the cold call FCA rules?
The FCA rule states that a firm must not make a cold call unless the recipient has an existing client relationshipp with the firm and the relationship is such that the recipient envisages receiving cold calls
What is true of member firms of the LSE?
They have dual capacity which gives the ability to act as principal or agent in different transactions
When is someone guilty of secondary insider dealing?
- They are in possession of insider information
- They know it to be from an inside source
Reporting complaints to the FCA?
In the biannual report: the number of complaints, completions of complaints within four weeks, eight weeks and over eight weeks from receipt and the number of commplaints accepted as valid by the firm
What is not a specified investment under FSMA 2000?
Spot FX
What has the Financial Reporting Council issued to encourage institutional shareholders to be more active and engaged in corporate governance?
The Stewardship Code
The Uk Corporate Goverance Code is best described as?
Having a ‘comply or explain’ approach
Large undertaking requirements
- at least€20 million balance sheet
- at least €40 million net turnover
- at least €2 million own funds
Difference between suitability and appropriateness
Suitability requirements apply when making a personal recommendation and this is not so with appropriateness which is relevant for non advised sales, otherwise described as execution only
Are tangible assets, such as gold, permitted under UCITS III?
No
What is true of an ordinary power of attorney?
The ordinary power of attorney wiill cease at the end of a specified time, when a specific act has accured or when the donee dies or becomes incapacitated
What effect will a shorter timescale have on the risk attitude of an investor?
Reduced risk tolerance
Describe DB pension scheme
Also known as final salary - the employer agrees to pay the member benefits equal to a pre-determined percentage of their salary at retirmenet depending on number of years worked
How often is the SIP required to be published and sent to fund members?
Annually
Under the pension protection fund, what would be the maximum compensation offered to the employees who are onot yet retired as a percentage of their pension payments due?
90%
What is a low level capital risk asset class?
Cash deposits
Which instruments are covered by the insider dealing legislation in the Criminal Justice Act 1993?
- FTSE index futures
- Warrants
- Contracts for difference
Within what time period must authorised fund managers publish reports?
Within four months of fund’s annual accounting period end date
The regulator’s organisational and systems and controls requirements are implemented through a set of high-level rules known as
The common platform
For an individual with a personal pension plan, from what age is flexi-access drawdown currently available?
55 years
What is the Financial Services (Banking Reform) Act 2013 not specifically conerned with?
Investor protection - this is one of the aims of the alternative investment fund managers directive
Up to what percentage may a listed company make purchases in a target company without being required to make a mandatory offer for the target?
29.9%
What is not a threshold condition for authorisation that is applied specifically by the FCA?
Business to be conducted in a prudent manner
SYSC rules on apportionment of responsibilities relate to the Principle for Business entitled?
Management and control
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Retail investment advisers required training?
35 hours of CPD annually, of which 21 hours must be structured
What is not one of the recognition requirements applying to an investment exchange?
The exchanged mus be authorised to conduct regulated activities (they are exempt)
Appropriateness needs to be established
For non-advised sales in respect of complex instruments
What is not exempt from financial promotions rules under FSMA 2000?
Promotions issued by a firm’s appointed representatives
Why should Stephen not have made a cold (unsolicited) call?
Stephen did not state the firm he worked for during the call
What is the cooling off period for a stakeholder pension plan?
Maximum period is 30 calendar days. A retail client has a right to cancel a packaged product within 14 days except for life policies and pension schemes where the period is 30 days
What is true of the rule on inducements?
Third-party payments are allowed if immaterial and disclosed in the conflicts of interest policy
Explain the FOS
An alternative to the courts fo an eligible complainant when a firm has failed to deal with a complaint to their satisfaction. The maximum award is £375,000 and is binding on the firm
What are the four phases of product governance cycle?
- Design and approval
- Development and implementation
- Launch and promotion
- Monitoring and review
UCITS V
- Responsibilities of depositaries were enhanced
- Remuneration policies for UCITS fund managers were introduced
What is true about Senior Management Functions?
They involve or might involve a risk of serious consequences for the authorised person or for business or other interests in the UK
The common reporting standards were developed by the OECD, what is the main purpose of these?
To fight tax evasion
What was the angle that the UK Criminal Finances Act 2017 introduced on tax evasion?
It allowed criminal liability to be ascribed to the firm where tax evasion occured
Fines for GDPR breaches
€20m or 4% global turnover, whichever is greater. Fines for other breaches can be up to €10m or 2% of global annual turnover
Where will directors’ transactions in UK listed companies appear?
In company’s annual report and on regulatory information service
Requirements for AGM
To be held within six months of financial year end. Intervals between AGMs not more than 15 months giving at least 21 calendar days notice
What is the largest gift a parent can make on the event of their child’s civil partnership that is fully exempt from IHT?
£5,000
Normal method of issuance for UK government bonds
By variable price auction
Which rule applies to the firm’s relationships with eligible counterparties?
Client categorisation
Electronic notice to be sent when with respect to company meetings?
48 hours
Four level approach to create a single market in financial services in Europe?
Financial services action plan
Who creates a power of attorney?
The donor
What do notification requirements not cover?
Persistency levels, which are a measure of the proportion of contracts that remain in force after a specified period
When an individual’s financial affairs are taken over by the court, under the insolvency act this is known as
Bankruptcy
What provides tax-free income for UK residents?
National savings and investment savings certificates and NS&I children’s bonds. ISAs
What age can you take income from a personal pension plan?
55
What is true regarding disclosure of directors’ interests in shares
- All dealings must be disclosed to the company
- Disclosure must be within 4 business days
What is true about the FPC?
Publishes two financial stability reports each year and meets at least quarterly
Explain stamp duty reserve tax
Stamp duty reserve tax paid by the buyerof uncertificated shares. If an investor bought a certificated share they pay stam duty. When selling they would only pay commission and levy to the Takeover Panel as the transaction is >10,000
Purchasing 1,200 shares, Current bid-offer is 11.62-11.73. Commission per trade is £3.25. What is total round trip cost?
Buy 1200 shares at 11.73
Sell 1200 shares at 11.62
Commission at 23.25
SDRT 0.0005 (120011.73)
PTM levy (2*£1)
What is not true for a bankruptcy order?
Trustee in bankruptcy protects the bankrupt’s property until the official receiver takes over
Insider dealing offence under?
Criminal Justice Act 1993
Age limit for obtaining tax relief on contributions to a registered pension scheme?
75 years old
What is a legal entity under the Bank of England?
The prudential regulation authority
A retail investment adviser giving independent advice is?
Barred from accepting commission from a product provider
Rules about non-monetary benefits?
- They are cleary disclosed
- They do not impair compliance with the firm’s duty to act in the best interests of the client
- They are capable of enhancing the quality of the service provided
The FCA has power to prosecute through the criminal courts for a number of offences, but not in respect of?
Market abuse that is not insider dealing
What is true about appropriateness?
The firm must assess the client’s understanding of risk
What is the statutory time limit following a Phase II decision for remedies to be implemented?
12 weeks
Exceptions about insider dealing
- Individual who passes information but did not expect the recipient to deal
- Deal was not done to make a profit or prevent a loss
- Where market maker had information based on their business but acted genuinely for that business
- Price stabilisation
- As a friend of a director - you are only an insider if you know it is inside information
Best execution is designed to protect?
Retail and professional clients
Which type of scheme is generally most dependent on market returns?
A defined contribution pension scheme
Under GDPR, an organisation must notify ICO within what time period?
72 hours
What is true of an MTF?
A system where a firm provides services similar to those of exchanges by matching client orders
Example of a specified investment
T-bills
Takeover panel rules apply to
All public companies only, listed and unlisted. Also applies to certain private companies where the company has been listed in the last ten years
What percentage represents a controlling interest?
More than 50%
A company has rights as defined by law in its capacity as a legal person. What is the name of this?
Artifical person
What is not subject to the financial promotion rules?
A promotion in relation to a takeover
For which type of client is a basic written agreement needed?
Retail and professional client
The conflict of interest policy of a firm is least likely to prevent
A conflict betwen the authorised firm and their competitor
Describe personal account dealing rules
To prevent dealing when in the knowledge that the firm’s research department are about to release a positive report of a security
Penalties the FCA impose for all forms of market abuse
- Public censure
- Discipline of approved persons
When can a poll vote be called by shareholders?
By having 10% of total voting rights or by five members who are entitiled to vote or by the Chairman.
Stamp duty rates
First 125 - 0
125 - 2%
675 - 5%
25 - 10%
Dividend rates
8.75
33.75
39.35
BTL rates
18% and 28%
SEAQ
Quote driven
