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Unit 1: Regulations > REGS BIBLE Chapter 3 > Flashcards

REGS BIBLE Chapter 3 Flashcards

1
Q

What are the three offences defined under S52 CJA 1993?

A
  1. Dealing on inside information
  2. Encouraging others to deal on inside information
  3. Disclosure of inside information?
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2
Q

Which 4 conditions have to be met for information to be considered ‘inside information’ under CJA S52?

A
  • relates to particular securities/issuers
  • specific or precise
  • not been made public
  • price sensitive
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3
Q

What does S52 CJA relate to?

A

Insider dealing

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4
Q

Is insider dealing a criminal or civil offence?

A

Both

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5
Q

What replaces burden of proof for civil offences?

A

Balance of probability (a lighter burden of proof)

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6
Q

How can misleading impression and insider dealing offences be prosecuted as civil offenses?

A

Under UK MAR which encapsulates both S52 CJA and S89-91 FSA

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7
Q

Is market abuse a criminal or civil offence?

A

Civil

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8
Q

What two conditions are there for proving a criminal offence?

A
  • must prove intent
  • evidence must be beyond all reasonable doubt
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9
Q

What are the criminal punishments for S52 CJA and S89-91 FSA offences?

A

Max 10 years imprisonment and/or unlimited fine

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10
Q

What must conditions must be met to prove a civil offence under UK MAR?

A
  • behaviour of individual has abusive/damaging effect to interest of others
  • balance of probability
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11
Q

What is the maximum punishment for a civil offence under UK MAR?

A

Unlimited fine (FCA cannot enforce imprisonment)

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12
Q

What instruments are covered under S52 CJA?

A
  • equities (shares, ADRs, warrants)
  • tradable debt (corporate/government bonds, gilts etc)
  • derivatives (options, futures, CFDs)
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13
Q

What investments are excluded from S52 CJA (out of scope of criminal law)?

A
  • assets with no secondary market (eg. bank account, unit trusts)
  • commodities and commodity derivs
  • spot and forward FX
  • insurance

NOTE: must be traded on a regulated market/via professional intermediary to be criminally prosecuted

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14
Q

What does S89 FSA 2012 relate to?

A

S89 - Misleading statements (lying)

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15
Q

What is considered public information?

A

Information reported to a regulatory information service (RIS)

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16
Q

What does S90 FSA 2012 relate to?

A

Misleading impressions (eg. abusive squeezes, market rigging)

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17
Q

What does S91 FSA 2012 relate to?

A

Misleading statements in relation to benchmarks (eg. LIBOR)

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18
Q

What are the general defences for insider dealing?

A
  • did not expect to make profit (or avoid loss)
  • believed on reasonable grounds information was public
  • would have acted the same regardless of info
  • did not expect recipient to deal
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19
Q

What 3 things must insider lists include?

A
  • identity of each person having access to inside information
  • reason why such a person is on the list
  • date on which the list was created and updated
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20
Q

What are the 3 special defences for insider dealing?

A
  • Price stabilisation rules
  • Market information (market sensitive but NOT inside info)
  • Market makers in ordinary course of business (in good faith)
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21
Q

What are the two steps to prosecuting insider dealing?

A
  1. LSE monitors transactions and tips off regulators of any unusual patterns
  2. FCA then prosecutes if it has good quality evidence to criminal burden of proof
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22
Q

What is the general defence for Misleading statements and impressions?

A
  • reasonable believed statement/act was not false/misleading
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23
Q

What are the 3 special defences for S89-91 FSA 2012?

A
  • Acted in conformity with price stabilisation rules
  • Compliance with control of information rules (ie. Chinese walls in place)
  • Compliance with share buy-back rules
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24
Q

Can companies be disciplined under UK MAR?

A

Yes - both individuals and firms can be prosecuted for a civil offence

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25
Q

What is the scope of MAR? (think products)

A
  • financial instruments traded on a regulated market/MTF/OTF
  • Emissions allowance (eg. carbon credits)
  • for market manipulation it also applies to commodity derivs and commodity spot markets
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26
Q

what amounts to market abuse according to the FCA Market Conduct handbook Guidance?

A
  • insider dealing
  • improper disclosure
  • manipulating transactions
  • manipulating devices
  • dissemination
  • benchmark manipulation
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27
Q

What are the 4 civil penalties under UK MAR?

A
  • withdrawal of regulated status
  • financial penalties without limit
  • public statements
  • apply to courts for injunctions/restitutions
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28
Q

What are 4 examples of legitimate behaviours (safe harbours)

A
  • Share buy-back programs and stabilisation measures
  • FCA rules
  • Takeover code
  • Market soundings
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29
Q

What are STORs?

A

Suspicious Transactions and Order Reports

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30
Q

How soon must firms report suspicions to the FCA?

A

Without delay (should never second-guess)

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31
Q

What 5 things must a STOR contain?

A
  • Identity of reporting person
  • Description of order/transaction
  • Reasons for which market abuse is suspected
  • Means of identifying any person involved in order/transaction
  • Any other supporting documents
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32
Q

What is the MAR PDMR regime?

A

Persons discharging managerial responsibility (eg employees and directors) dealing in own company’s shares must disclose to both company and FCA within 3 business days of transaction

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33
Q

What is the closed period in which a PDMR cannot trade?

A

30 days prior to announcement of Year End or Half Year results

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34
Q

Is a breach of MAR PDMR regime a criminal offence?

A

No - disciplinary action would be taken by FCA against individual or company

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35
Q

What is the de minimise threshold set by MAR at which PDMR do not need to disclose transactions?

A

5000 euros per calendar year (without netting the transactions)

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36
Q

Which legislation criminalises money laundering?

A

POCA 2002

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37
Q

What is the Money Laundering Regulations 2017?

A

Detailed regulations setting out administrative provisions for any companies at risk of handling firms for money laundering/terrorist financing

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38
Q

What is the JMLSG guidance?

A

Joint Money Laundering Steering Group guidance is industry guidance notes on how to implement MLR compiled by a panel of industry practitioners

NOT Binding

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39
Q

What are the 3 stages of money laundering according to POCA 2002 and who is most at risk at each stage?

A
  1. Placement - banks
  2. Layering - fund managers, investment firms
  3. Integration - anyone
40
Q

What does the Economic Crime (Transparency and Enforcement) Act 2022 dictate regarding public register of overseas entities?

A
  • Foreign companies and beneficial owners holding property/investments in UK must register
  • Failure to do so is a criminal offence punishable with max. 5 years imprisonment/unlimited fine
41
Q

What are the 4 general offences under POCA 2002?

A
  • concealing
  • arrangements (assisting)
  • acquiring/possessing
  • knowingly prejudicing an investigation
42
Q

What is the max penalty for concealing/arranging/acquiring ML/proceeds of ML?

A

14 years and/or unlimited fine

43
Q

What is the max. penalty for knowingly prejudicing a ML investigation?

A

5 years and/or unlimited fine

44
Q

What are the 2 regulated sector offences under POCA 2002 and their respective punishments?

A
  • Failure to report; 5 years and/or unlimited fine
  • Tipping off; 2 years and/or unlimited fine
45
Q

Can a person be prosecuted for failing to report a ML suspicion even if there was no ML offence?

A

Yes - no offence is no defence; if they reasonably ought to have had a suspicion they can be prosecuted

46
Q

What is a defence against accusation of failure to disclose ML?

A

Inadequate/no training to recognise suspicious activity

47
Q

Which legislation dictates the appointment of a MLRO?

A

MLR 2017

48
Q

According to MLR 2017, can companies rely on CDD from any firm?

A

No - cannot rely upon CDD by firms in high risk jurisdictions (eg. country on sanctions list)

49
Q

When is enhanced CDD required according to MLR 2017?

A
  • for politically exposed persons (PEPs) and any family members/known close associates
  • customers from high-risk jurisdictions
  • customers involved in dual-purpose goods
  • where client has not been physically present for identification
  • when customer has provided false/stolen identification
  • complex transactions
50
Q

When is simplified CDD allowed according to MLR 2017?

A

Where risk is considered low - firm can decide what they consider low risk

eg. authorised firm already vetted by a regulator

51
Q

What is the difference in the identification procedures for individuals vs companies in process of CDD?

A

individuals - proof of id and address

companies - includes ownership and control structure, usually identified through third party

52
Q

Which third party in the UK typically carries out CDD for firms?

A

Companies House

53
Q

Who does the MLRO report to?

A

NCA - the national Crime Agency

54
Q

What are the two types of suspicions with regards to ML and which should be reported?

A

objective - has evidence

subjective - no evidence

both should be reported

55
Q

How long should CDD record be kept?

A

5 years

56
Q

What is the max punishment for SMFs who fail to comply with the MLR?

A

2 years and/or unlimited fine

57
Q

Who is the NCA led by and accountable to?

A

Led by senior chief constable

Accountable to Home Secretary

58
Q

What are the 4 offences under the Bribery Act 2010 and their sections?

A

S1 - paying bribes
S2 - receiving bribes
S6 - bribery of foreign officials
S7 - failure to prevent bribery

59
Q

Are facilitation payments considered bribes?

A

Yes - however note that paying for legally required admin fees and fast-track services is not facilitation

60
Q

Is hospitality considered bribery?

A

no

61
Q

What are the maximum penalties for individuals and companies under the Bribery Act 2010?

A

Individual - 10 years and/or unlimited fine
Company - unlimited fine

62
Q

What is a defence of S6 under the Bribery Act 2010?

A

Showing that local written law required payments to be made (may be a cultural custome)

63
Q

What is a defence of S7 under the Bribery Act 2010?

A

proof of adequate procedures in place to prevent bribery

64
Q

What is the key distinction between ML and Financial Terrorism?

A
  • Money from ML can never be from a legitimate source, however money being distributed into terrorism can be
    1. small amounts
    2. from a legitimate source
65
Q

What 3 suspicions are we obligated to report under the Terrorism Act 2000 and Anti-Terrorism Crime Security Act 2001?

A
  • provision of funds for terrorism
  • use and possession of terrorist funds
  • laundering money which is terrorist property
66
Q

What is the Counter Terrorism Act 2008?

A

Gives HMT powers to impose directions on firms suspected of handling funds to be used for terrorist activities

67
Q

What are 3 powers of HMT under the Counter Terrorism Act 2008?

A
  • CDD and monitoring (can increase identification requirements)
  • Systematic reporting (HMT can require info without application to courts)
  • Limiting or ceasing business
68
Q

When can HMT limit/cease business of a firm under Counter Terrorism Act 2008?

A
  • Where FATF (financial action task force) requires
  • Where HMT believes there is significant threat to national interests
69
Q

What are the disclosure thresholds under the EU Transparency Directive?

A

5, 10, 15, 20, 25, 30, 50 ,75% - at any of these levels shareholder must notify company that they hold this level of shares

70
Q

How many business days does a shareholder have to disclose ownership to issuer under the UK Disclosure rules?

A

2

71
Q

What is the general threshold rule at which shareholder must notify issuer under UK Disclosure rules?

A

from 3% and any percentage point thereafter

72
Q

What are the 4 special threshold rules under UK Disclosure rules?

A

Fund managers - notify at 5%, 10% and every percentage point thereafter

Market makers - exempt below 10%

Custodian and bare nominees - exempt

shares held as collateral - exempt

73
Q

Why are custodians, bare nominees, and shares held as collateral exempt from UK Disclosure rules?

A

Because they are not considered beneficial owners

74
Q

What letter may an issuer send out on suspicion that a notifiable interest has not been disclosed?

A

S793 Letter

75
Q

What does Companies Act 2006 S793 Letter require disclosure of?

A

Shares held:

  • At present time
  • In last 3 years
76
Q

What is another name for the S793 letter

A

Enquiry notice

77
Q

What are the 4 types of connected parties?

A
  • spouse
  • minor children
  • any company in which you hold 1/3 of shares
  • concert parties
78
Q

Who administers the UK Takeover code?

A

the Takeover Panel (aka. the Panel on Takeovers)

79
Q

What is UK Takeover code’s aim?

A

To ensure shareholders are treated fairly and not denied opportunity to decide on benefits of a takeover

80
Q

What is excluded from UK Takeover code?

A
  • Financial/Commercial pros/cons
  • Competition policy
81
Q

Whose interests does the UK Takeover code protect?

A

Shareholders
Markets
Target company

82
Q

What are the 6 general principles of the UK takeover code

A
  • all shareholders given equal treatment and protected
  • shareholders given sufficient time and information to decide
  • board of target to act in best interests of company as a whole (includes customers, employees, suppliers)
  • false markets must not be created
  • predator can only make bid after ensuring they can meet cash requirements of bid
  • target company not to be hindered in business affairs for any longer than necessary
83
Q

What is a trade report ?

A

UK MiFID requirement to publish all historic prices and volumes of trades conducted on an exchange

84
Q

To whom are trade reports made?

A

To the relevant exchange

85
Q

What is the reporting time frame for trade reports?

A

Within 3 minutes

86
Q

If a trade is not conducted via an orderbook (whereby report is made automatically) who must make the report?

A

The senior member on the trade

If equal in seniority then the selling firm

87
Q

What are 2 examples of approved reporting mechanisms for transaction reports?

A

UnaVista, TRAX (via these mechanisms to the regulator)

88
Q

Who must make the transaction report?

A

both parties (buying and selling)

89
Q

What is the reporting timeframe for transaction reports?

A

End of next day

90
Q

What does a trade report include vs a transaction report?

A

trade - time, volume, price

transaction - all details of trade in standardised format

91
Q

Which body regulates OTC derivatives?

A

European Markets Infrastructure Regulation (EMIR)

92
Q

What are the reporting obligations under EMIR?

A

All derivative contracts must be reported to a trade repository

applies to both financial and non-financial counterparties

93
Q

What do the short selling regulations (SSR) dictate?

A

Must disclose all net short positions

disclosure generally private but may require public disclosure if position is large enough

94
Q

What are the 3 pillars of the basel framework implemented in CRD?

A
  1. Minimum capital requirements for credit, market, and operational risk
  2. Supervisory review (discuss w regulator whether additional capital should be held)
  3. Disclosure of risks and risk management
95
Q

Who sets the capital adequacy requirement for solo vs dual regulated firms?

A

solo - FCA
dual - PRA

96
Q

When must regulator be notified if capital falls to or below the capital adequacy requirement?

A

Immediately

97
Q

When must regulator be notified in regards to capital adequacy reuirement?

A
  • when capital falls to or below that level specified by the regulator
  • if firm systems are unable to calculate actual capital resources

Unit 1: Regulations (6 decks)

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