Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

LEVEL 6 Regulation and Compliance > REGULATORY FRAMEWORK > Flashcards

REGULATORY FRAMEWORK Flashcards

1
Q

What is the Financial Services and Markets Act?

A

It was created in 2000
An Act of Parliament
It created the Financial Services Authority and the Prudential Regulation Authority

FSMA still exists and is relevant to UK Financial Services Legislation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When was FSMA amended?

A

Amended by the Financial Services Act 2012, creating the FCA and the PRA as the new regulators for financial services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

When was FSMA amended further?

A

2023 with the Financial Services and Markets Bill

Contains a number of new provisions recognising the significant extension of powers that are being granted to the FCA, the PRA and the Bank of England (in respect of its supervision of Central Counterparty Clearing House and Central Securities Depositorys) and so seek to make them accountable to HM Treasury, but not under its control.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Purpose of the Financial Services and Markets Act?

A

It was enacted and its purpose was:
- establish a new single regulator
- make provisions for the regulation of financial services and markets
- provide for the transfer of statutory functions relating to building societies, friendly societies, industrial and provident societies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What were the Four Statutory Objectives upon the FSA?

A
  • MARKET CONFIDENCE - maintain confidence in financial system.
  • PUBLIC AWARENESS - promote public understanding of the financial system.
  • CONSUMER PROTECTION - seeing appropriate protection for customers.
  • REDUCTION OF FINANCIAL CRIME - reducing the extent for which it is possible for a business carried out by a regulated person to be used for purpose connected to financial crime.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Principles of Good Regulation

A
  • Efficiency and Economy
  • The role of management
  • Proportionality
  • Innovation
  • International Character
  • Competition
  • Public Awareness
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

PART II, Regulated and Prohibited Activities General Prohibition

A

No person can carry out regulated activity in the UK or purport to unless they are authorised or exempt.
Left to the REGULATED ACTIVITITES ORDER 2001 (RAO) which clarifies what they are.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

RAO - PRA

A

Regulated activities are PRA-regulated activities and are therefore regulated activities subject to prudential regulation by the PRA rather than the FCA.

The activities are:
a. the activity of accepting deposits as specified by Article 5 of the Regulated Activities Order
b. the activity of effecting a contract of insurance as principal as specified by Article 10 (1) of the RAO
c. activity of carrying out a contract of insurance as principal as specified by Article 10(2) of the Regulated Activity Order
d. dealing in investments as Principal when carried on by a person designated by the PRA under Article 3 of the RAO
e. the activity of managing the underwriting capacity of a Lloyd’s syndicate as managing agent at Lloyds as specified by Article 57 of the RAO
f. the activity of arranging, by the society incorporated by Lloyd’s Act 1871(b) by the name of Lloyd’s in deals in contracts of insurance written at Lloyd’s specifically.
g. any regulated carried on by that society in connection with, or purposes of the activity specified in (f)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

AUTHORISATION AND EXEMPTION (PART III)

A

Firms wishing to carry out regulated activities in the UK need to be either authorised or exempt.
firms includes individuals, firms, body corporates. branches of companies, partnerships and unincorporated associations.

Authorisation provided under PART IV of FSMA.

Permission not granted for all regulated activities. Part 4A permission specifies which regulated activities the firm can carry on, those investments to which the activities relate and any further requirements or special conditions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Section 23 of FSMA (Contravention of the General Prohibition)

A

A person commits a criminal offence if they carry on regulated activities in breach of the general prohibition set out in Section 19 of the Act.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Penalty for breaching section 19 of the FSMA (Contravention of the General Prohibition)

A

maximum of two years imprisonment and an unlimited fine

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Exclusions from Dealing as Principal – Absence of Holding Out

A

Person dealing for themselves in the hope of making a profit are required to be authorised or exempt.

This regulated activity restricted to those persons who are holding themselves out as and acting as market makers.

Person buying shares for themselves does not need to be authorised or exempt, unless they hold themselves to be a dealer.

  • firms which are professional dealers, for example market makers, and hold themselves out as such, are carrying on a regulated activity
  • individuals or companies who are not in the business of dealing in investments, and who invest only for themselves in the hope of making profit, are excluded.

Works for securities and contractually based investments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Other exclusions covering situations where dealing as principal is not classified as a regulated activity?

A
  1. Bank providing finance to another person and accepting an instrument acknowledging the debt.
  2. Company or other organisation issuing its own shares, warrants or debentures
  3. Using options, futures and CFD’s for risk management purposes as long as the company’s business is mainly unregulated activities
  4. Entering into transactions as principal for
    * sale of goods or supply of services
    * sale of a company
    * acting as a bare trustee
    * employee share scheme
    * overseas person
    * incoming electronic commerce provider
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Exclusions for advice in newspapers

A

If a newspaper includes investment advice, and that advice is not the principle purpose of the newspaper, then the newspaper is excluded from the regulated activity of advising on investments.

If the principal purpose of a publication is the provision of investment advice, with a view to encouraging investors or prospective investors to undertake investment activity, then authorisation is required. This is the case for periodicals which ‘tip’ certain investments and are often sold on a subscription basis. Known as “tipsheets”.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Trustees, Nominees and Personal Representative Exclusions

A

Exclusion from the need for authorisation if the person carrying the regulated activity is:
- acting as a representative of another party
-not holding themselves as carrying out regulated activities
-not receiving additional renumeration for providing these investment services

Applies to
-dealing in investments as principal
-arranging deals in investments
- managing investments
-safeguarding and administering investments
-sending dematerialised instructions
-advising on investments
-assisting in administration of a contract of insurance
-advising or entering into a home finance transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the exclusions for Employee Share schemes?

A
  • dealing in investments as principal
    -dealing in investments as agent
    -arranging deals in investments
    -safeguarding and administering investments
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the exclusions for overseas persons carrying on regulated activities?

A

If the overseas person carry out regulated activity if not from a permanent place of business in the UK.
These exclusions apply only if the business is completed through an authorised, or exempt, UK person, if the business is the result of a legitimate approach.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Exclusions for overseas activity

A

-Dealing in investments as principal
-Dealing in investments as agent
-Arranging deals in investments
-Advising on investments
-Agreeing to carry the regulated activity of managing investments, arranging deals in investments
-Operating an MTF/OTF
-Entering into, or administering, a home finance transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Who is exempt from the need to be authorised even though the activities they carry on are in theory regulated activities?

A

Exemptions may apply may also be limited to specified circumstances.
- appointed representatives
-recognised investment exchanges
-recognised clearing houses

other persons exempt under miscellaneous provisions are exempt persons.

Members of Lloyd’s and members of the other professions are not exempt persons but under Section 19 of FSMA only applies to them under certain circumstances.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How Exemptions are not split into two groups

A
  • Those described as exempt persons under FSMA - such as RCHs and RIEs
    -Those not described as exempt persons but who may be exempt from the need to apply to the FCA such as DESIGNATED PROFESSIONAL BODIES
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Activities Appointed Representatives can carry out under Section 39 of FSMA:

A
  • Arranging deals in investments
    -Advising on investments
  • Safeguarding and administering assets
    -Dealing in investments as long-term insurance contracts
    -Advising on and arranging regulated mortgage contracts
    -Advising on and arranging regulated home revision and home purchase palns
    -Assisting in the administration and performance of a contract of insurance
    -Providing basic advice on stakeholder products
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Appointed Representatives not allowed to do for regulated activities

A

Dealing in investments as principal and managing investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

FCA AR CP 21/34 Purpose

A

Reduce potential harm to consumers and markets
FCA has been clear that its proposals used results of their thematic reviews undertaken on the general insurance sector in 2016 and investment management sector in 2019.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

HM Treasury call for evidence on the AR Regime, what are the 4 key elements to the regulatory approach, which need changes to legislation should be enacted?

A
  • the overall scope of the Section 39 exemption, including the regulated activities which ARs are permitted to carry on

-regulatory tools available to the FCA, should be concluded that the FCA should be empowered to prevent abuse of the AR regime

  • whether more direct regulatory requirements should be placed on ARs in order to strengthen their incentives for regulatory compliance
  • the role of the Financial Ombudsman Service in relation to ARs and their principals where consumers have experienced detriment while dealing with an AR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Changes to the AR system that came into effect in December 2022?

A

Additional information on ARs and notification requirements for principals:
– will allow the FCA to identify potential risks
–it was also help to assess whether the principal has the expertise, systems and controls to oversee the ARs
–the FCA will be able to target its supervisory intentions more effectively

Clarifying and strengthening the responsibilities and expectations of principals:
–Providing guidance for principals on their responsibilities
–Providing FCA expectations on how they should act and oversee their ARs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Miscellaneous Exempt Persons

A
  • the Bank of England
    -central banks of EEA member states
    -European Central Bank
    -European Investment Bank
    -International Bank for Reconstruction and Development
    -International Monetary Fund
    -European Bank for Reconstruction and Development
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Why does the general prohibition not apply to Lloyd’s?

A

The FCA expects the activities to be supervised and executed by the Society of Lloyd’s and therefore additional FCA authorisation of members is unnecessary.

Members who ceased to be an underwriting member at any time on or after 24 December 1996 is disapplied. They can carry out insurance contracts underwritten at Lloyd’s without need for authorisation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Activities DPB are not allowed to carry out

A
  • accepting deposits
    -dealing in investments as principal
    -establishing, operating or winding up CISs or stakeholder pension schemes
    -effecting or carrying out contracts of insurance
    -providing funeral plan contracts
    -issuing electronic money
    -providing basic advice on stakeholder products
    -establishing a pension scheme
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

How the Regulator can vary permissions?

A
  • adding a regulated activity for which it gives permission
    -removing a regulated activity from those which it gives permission
    -cancelling a requirement imposed on Section 43
    -varying such a requirement

Regulator may exercise its powers in relation to an authorised person if it appears so
- failing or likely to fail
-they have failed during a period of 12 months to carry on a regulated activity for which they have a permission

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Different disciplinary measures

A
  • Publishing statements
  • Imposing financial penalties in respect of a contravention
    -Suspend or impose limitations on the authorised person, for a period of time while the regulator conducts an investigation
    -FSMA dictates that the authorities must provide a warning notice to the authorised person if the regulators will take disciplinary action
  • If a firm/individual is carrying out market abuse, the FCA is responsible for applying to the courts to seek an injunction agaisnt any individual or firm conducting market abuse.

FSMA provides the FCA with the power to impose penalties for insider dealing and inside information.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Regulators rule making powers

A
  • the handling of client money
  • requirement for firms to have a renumeration policy
  • recovery and restitution plans for banks
  • insurance business rules
  • price stabilising rules including the manner in which they are permitted
  • financial promotions rules
    -money laundering rules
  • control of information rules
  • modification of waiver
  • contravention of rules, including evidential provisions
  • procedural provisions, including the notification of rules to the Treasury
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Additional Powers granted in the FSMA 2010

A

Financial Services Act 2010 effective from 8 June 2010 gave additional powers to the then regulator

  • power to impose suspensions or restrictions on authorised persons under s206A FSMA on approved persons under s66 FSMA (the suspension order)
  • the power to impose penalties on persons which perform controlled functions without approval under s63A FSMA
33
Q

What is the Suspension Power?

A

It enables the regulator to suspend any permissions the person may have to carry on a regulated activity or impose restrictions on that person carrying on a regulated activity

Can be imposed for a period of 12 months and on an approved person for 2 years

alternative to a financial penalty which could be imposed by the regulator

the regulator states that it would only use this power when it considers that the imposition of a suspension would be the most effective and persuasive deterrent,

34
Q

Who is responsible for providing warning and decision notices when the suspension power is used?

A

Regulatory Decisions Committee (RDC)

35
Q

What does the Non-Approved Persons Penalty Power do?

A

The regulator is able to impose a financial penalty on a person, of an amount it sees as appropriate, when it is satisfied that
- the person has at any time performed a controlled function without approval and
- at that time the person knew or could be expected to have known that they were conducting an activity without approval

36
Q

What is the Bank of England Act 1988?

A

makes provisions for the constitution, regulation, financial arrangements for the BoE

To protect and enhance the stability of the financial systems of the UK

37
Q

Functions of the oversight committee for the BoE

A
  • the Banks objective
  • monitoring the extent to which the Bank’s financial management has been met in relation to the court’s set objectives for the directors of the Bank
  • keeping the internal controls of the Bank under review, with a view to securing the proper conduct of its financial affairs

The Bank must provide HMT with a copy of reports prepared by the oversight committee.

Before determining or revising the Bank’s financial strategy, the court of directors must consult on the revised strategy with the Financial Policy Committee (FPC) and HMT.

38
Q

What is the banking act 2009

A

The Banking Act 2009 created a Special Resolution Regime (SRR) which gave the UK regulators a permanent framework, providing the regulatory resolution tools for dealing with UK banks and building societies at serious risk of failure.

The SRR powers came into force in 2009.

39
Q

Seven Objectives of the Banking Act 2009

A
  • protect and enhance the stability of the UK financial system
  • protect and enhance public confidence in the system
  • protect depositors and investors covered by relevant compensation schemes
  • protect client assets
  • protect public funds and minimise reliance on public financial support
  • avoid interfering with property rights
  • ensure the continuity of the banking services and credit services
40
Q

Special Resolution Regime power allows the regulated authority to:

A
  • transfer all or part of a bank’s business (assets and liabilities) to a private sector purchaser
    -transfer all or part of a bank’s business to a bridge bank
  • place a bank into temporary public ownership
  • apply to place a bank into the bank insolvency procedure designed to allow for rapid payments to the Financial Services and Compensation Scheme
  • apply to use the bank administration procedure to deal with part of a bank

The Treasury decides whether to place a bank into temporary public ownership.

41
Q

The Bank of England and Financial Services (BEFSA) Act 2016 (the Act) purpose

A

Ended the status of the PRA as a subsidiary of the BoE by making the BoE the PRA. The Act also creates the Prudential Regulation Committee (PRC), through which the BoE must exercise its functions as the PRA.

42
Q

Objectives of the PRA

A

Contribute to the promotion of the stability of the UK financial system through the microprudential regulation of those firms within the regulatory remit.

Overall objective to promote the safety and soundness of regulated firms and will meet this objective by seeking to minimise adverse effects of firm failure on the UK financial system.

43
Q

The PRA’s complementary objectives

A
  • firstly, to secure an appropriate degree of protection for policyholders
  • minimise the adverse impact that the failure of an insurer or the way an insurer carries outs its business could have on the stability of the UK financial system.
44
Q

How the PRA aims to achieve its objectives

A
  • aiming to avoid failures which are a cost to the UK economy
  • emphasizing resolution planning in order to permit orderly failure
  • cooperating closely with the FPC and the FCA to ensure macro and micro prudential regulation is aligned across all markets
  • working with the FCA to ensure the UK authorities have a strong voice in international - particularly European - policy-making.
45
Q

What is the FCA’s role?

A

To ensure relevant markets for financial services in the UK function well.

46
Q

How does the FCA achieve its strategic objective?

A
  • secure an appropriate degree of protection for consumers
  • protect and enhance the integrity of the UK financial system
  • promoting effective competition in the interests of customers

Also has a seperate duty to minimise the extent to which businesses may be used for purposes connected to financial crime

47
Q

FCA additional responsibilities

A
  • focuses on the conduct regulation of all firms, covering their dealings with retail customers, through to their activities in the wholesale markets.
  • responsible for prudential supervision of firms not prudentially supervised by the PRA
  • regulates trading infrastructure, including investment exchanges
  • taken on the FSA’s responsibilities as the UK Listing Authority
  • responsible for overseeing the UK’s Financial Ombudsman Service.
  • criminal powers to investigate insider dealing
48
Q

The Financial Services Act 2012 Volume 1

A

Contains the clauses

49
Q

The Financial Services Act 2012 Volume 2

A

Contains the Schedules to the Act

50
Q

Part One Financial Services Act (Bank of England)

A

In addition to a Governor, there should be a deputy governor for financial stability and monetary policy.

No more than 9 Non-Executive Directors

Instead of ‘contributing’ to protecting and enhancing the UK financial system, the Bank is now tasked to ‘protect and enhance the UK financial system’.

Financial stability and strategy / Financial Policy Committee (FPC) - The BoE created a subcommittee (Oversight committee) consisting of the non-executive directors to review the Bank’s strategy, the bank’s performance in comparison to its objectives, the duty of the FPC and the bank’s strategy.

51
Q

Part 2 of the Financial Services Act (Amendments of FSMA 2000)

A

The FCA’s strategic objectives
- secure an appropriate degree of protection for consumers

  • protect and enhance the integrity of the UK financial system
  • competition objective should promote effective competition in the markets/services provided by RIEs. FCA must maintain arrangements to supervise, monitor and take appropriate enforcement action against authorised persons.

The FCA must consult a practitioner to ensure their policies are consistent with general duties. FCA must establish a practitioner panel, smaller business practitioner panel and a markets practitioner panel.

PRA’s objective is to promote the safety and soundness of the PRA-authorised persons. This objective is sought to be satisfied by looking to ensure that PRA authorised persons carry out activities that do not have adverse effects on the stability of the UK financial system.

The PRA has an additional objective to protect those who become policyholders of insurers.

52
Q

Part 2 of the Financial Services Act (Amendments of FSMA 2000) two new regulated activities that were added.

A
  • Where a regulated activity is carried out by way of business
  • A persons financial standing and the setting of financial benchmarks (this occurred as a result of the LIBOR scandal)
53
Q

Part 2 of Financial Services Act 2012

A

DESIGNATION OF ACTIVITIES REQUIRING PRUDENTIAL REGULATION BY THE PRA - HMT could specify which regulated activities could be supervised by the PRA

PERMISSION TO CARRY ON REGULATED ACTIVITIES
regulated permission to carry out permitted regulated activities must be made to the appropriate regulator - being dual regulated

PROHIBITION ORDERS FSMA Section 56 amended so that both the FCA and PRA with powers so the regulators are allowed to make a prohibition order to evidence an individual is not FIT AND PROPER.

RULES AND GUIDANCE (general making powers of the FCA and the PRA) allows them to make rules for authorised persons with the respect to the carrying on by them of regulated activities.

POWERS FOR RIE AND CLEARING HOUSES - FCA is appropriate regulator for RIE and the BoE is appropriate for clearing houses.

POWER TO TAKE DISCIPLINARY MEASURES AGAINST RECOGNISED BODIES Provides public censure powers to both bodies to publish a statement if they consider a recognised body has contravened a reg requirement.

DISCIPLINE AND ENFORCEMENT Where HMT considers it necessary, no public disclosure will be made in respect of a warning notice made by the regulators.

PROVISIONS ABOUT CONSUMER PROTECTION AND COMPETITION - designated consumer body to make a complaint to the FCA if it believes a feature or combination of features appears to be damaging the interests of customers

54
Q

PART 4 of Financial Services Act - Collaboration of the Treasury and the BoE

A

DUTY OF BANK TO NOTIFY THE TREASURY OF POSSIBLE NEED FOR PUBLIC FUNDS - The BoE must notify the Treasury of a potential material risk
- may have to provide financial assistance

-there will be an exercise of the respective powers provided under parts 1 to 3 of the Banking Act 2009

  • when the manager of the FSCS may request a loan from the National Loans Fund or financial assistance from HMT
55
Q

PART 4 of Financial Services Act - Duty of Treasury, Bank and PRA

A

HMT, the BoE and the PRA must discharge their functions so far as they relate to the stability of the UK Financial system

56
Q

PART 4 of Financial Services Act - Memorandum of Understanding: Crisis Management

A

HMT, the BoE and the PRA must prepare a memorandum describing how they plan to coordinate their supervisory activities

57
Q

PART 4 of Financial Services Act - Memorandum of Understanding: international organisations

A

HMT, the BoE and the PRA must prepare a memorandum how they intend to coordinate the exercise of their relevant functions so far as they relate to the European Supervisory Authorities

58
Q

PART 5 of Financial Services Act INQUIRIES AND INVESTIGATIONS
Cases the Treasury may arrange independent inquiries

A

HMT may arrange seperate inquiries relating to events occurring in respect of CISs.
a person carrying out regulated activity, selling of securities, issuer of listed securities
when events pose a threat to the UK financial system

59
Q

PART 5 of Financial Services Act INQUIRIES AND INVESTIGATIONS

A

Power to appoint a person to hold an inquiry

Powers of appointed person and procedure

60
Q

PART 5 of Financial Services Act INQUIRIES AND INVESTIGATIONS the Duty of the FCA

A

It is the duty of the FCA and PRA to investigate cases there may have been regulatory failure
- it is up to the regulators to decide best on how to carry out investigations. HMT may direct the regulators however in relation to the scope and period over which the investigation is to be carried out.
- these policies must be released in a policy statement and the policy intentions in relation to the exercise of functions under the duty to conduct the investigation

61
Q

PART 6 of Financial Services Act - INVESTIGATION OF COMPLAINTS MADE AGAINST THE REGULATORS

A

Part 6 requires both the FCA and the PRA to make necessary arrangements for the investigation of complaints arising with the connection of the exercise or failure to exercise any of their regulatory functions.
Investigation of complaints - provides regulators with the power to decide if a complaint should be reviewed and dealt with differently - such as referring it to a Tribunal

62
Q

FINANCIAL SERVICES AND BANKING REFORM ACT 2013

A

Implemented some recommendations provided by the Independent Commission on Banking and key recommendations of the Parliamentary Commission on Banking Standards

  • Rules on the ring-fencing requirements for the banking sector
  • Creation of individual accountability through creation of SM&CR (part 4)
  • Creation of the criminal offence of mismanagement of a bank
  • created bail in Stabilisation Regime through the SRR (part 3)
  • created the Payment Systems Regulator (part 5)
  • further powers for the FCA to limit the special resolutions regime
63
Q

FINANCIAL SERVICES AND BANKING REFORM ACT 2013 PART 1 RING FENCING

A

It is to insulate the banking system from any financial shocks

It seperates retail banks from investment banking.

UK-incorporated regimes are subject to the regime unless it is a institution which is exempt such as certain categories of deposit taking institutions such as building societies, credit unions and institutions which hold below £25 billion.

UK branches of non-UK banks are not subject to the ringfencing requirements, although UK incorporated branches are subject.

Came into effect 2019 - altered by Edinburgh reforms

64
Q

PART 4 CONDUCT OF A PERSON WORKING IN THE FINANCIAL SERVICES SECTOR

A

SM&CR
individual accountability
initially applied to banks, insurance firms but extended to all regulated firms

65
Q

BANK OF ENGLAND AND FINANCIAL SERVICES ACT (BFSA) 2016

A

Third major piece of legislation the government made to reform the financial sector

SECTION 21 - extending to authorised persons provisions of Part 5 of FSMA which applies only to relevant authorised persons
SECTION 22 - provides powers to the FCA and the PRA to make transitional provisions
SECTION 23 - inserts the FCA and the PRA as the administrators of the Senior Manager Scheme
SECTION 24 - rules of conduct (minor cosmetic changes)
SECTION 25 - misconduct
SECTION 26 - decisions causing a financial institution to fail: meaning of insolvency

66
Q

UK FINANCIAL SERVICES ACT 2021

A

The UK’s first step to post-Brexit but aiming the UK to remain a ‘open and dynamic financial centre’
Received Royal Assent on April 2021

Part 4A Permissions
Consumer Duty
Money Laundering
Debt Respite Scheme
Help to save
Buy now, pay later products

67
Q

POST BREXIT REFORMS

A

UK PRUDENTIAL FRAMEWORK
- Investment firms prudential scheme
- Basel III and 3.1 standards

ACCESS TO FINANCIAL MARKETS
- Overseas fund regime
-UK MiFIR equivalence
- PRIIPS
- UK EMIR

INSIDER DEALING
- personal data
-maintaining insider lists

IBOR
-providing FCA with appropriate power to manage the cessation of critical ‘LIBOR’ benchmarks to protect consumers

67
Q

IFPR Act 2022

A

It follows the EU’s Investment Firms Directive and Regulations, which came into effect in June 2021, given the UK was involved in the legislation.

came into effect 1 January 2022.

Approach is to consider the harm an FCA investment firm can cause to others based on the activities it carries out and ensures that the amount of capital and liquid assets it holds is sufficient to undertake an orderly wind down.

68
Q

Following outcomes IFPR hoped to achieve with the rules

A

A prudential regime that is aligned to the way that investment firms run their business:
- taking into account different business models of FCA investment firms
- better protecting customers and markets from the harm firms may pose

FCA firms are subject to meaningful and consistent prudential requirements

FCA investment firms spend less time on complex capital requirement calculations that do little to help them manage risk

Prudential rules that are understandable and accessible, with most rules brought under a single sourcebook

69
Q

MiFIDPRU1 Application

A

The FCA removed the current definitions of investment firms in BIPRU, IFPRU and exempt-CAD

Rather ‘SNI’ or non-‘SNI’

70
Q

Prudential Consolidation and the Group Capital Test MiFIDPRU2

A

Prudential consolidation will apply when there is an investment form group that comprises of a UK Parent undertaking and its subsidiaries

71
Q

Own Fund Resources (MIFIDPRU3)

A

Types and treatment of own funds under the IFPR will follow same requirements to comprise the following three classes:

  • Common Equity Tier 1 (or CET1) capital
  • Additional Tier 1 (or AT1) capital
  • Tier 2 (or T2) capital
72
Q

Own Funds Requirements (MIFIDPRU4)

A

Permanent minimum capital requirement (PMR) and requirements based on the activities and services the fund undertakes

number of transitional provisions to assist firms - especially when there is a large increase from previous capital requirements

73
Q

Concentration Risk (MIFIDPRU5)

A

General provisions on monitoring and control of concentration risk apply to all firms with limited exceptions

Provisions on limits and own funds requirements for concentration risk (K-CON) only apply to firms with a trading book, ie, trading as principal.

74
Q

Collective Investment Schemes FSMA (PartXVII)

A

FSMA defines what is meant by the arrangements for and identifies the restrictions in place in relation to the promotion of CISs.

FSMA also provides powers in order to review, approve and refuse applications on authorised unit trust schemes.

75
Q

UCITS Directive

A

UCITS directive aimed at security a common set of regulatory standards for open-ended funds known as OEICs and unit trusts in the UK or SICAVs.

Put simply, if a collective fund is set up in accordance with the UCITS rules then it should be able to be sold across the EU, subject to only local tax and marketing laws. So, a UCITS scheme can gain a simple authorisation from the home state regulator and need not apply for further authorisation in other member states.

76
Q

UCITS requirements:

A
  • scheme has to be solely invested in transferable securities
  • no more than 10% of the fund can be in shares or bonds of a single issuer
  • no more than 5% of the assets of the scheme are allowed to be invested in other CISs.
  • scheme was only able to hold money in bank deposits as ancillary liquid assets and not as a major part of the investment strategy
  • scheme was only able to invest in, utilise financial derivatives for efficient portfolio management or hedging purposes

As a result, some UK CISs were UCITS compliant and some were not
Demand for a wide variety of funds put some of these requirements as out of date

77
Q

New UCITS directives - UCTIS III - What are they?

A
  • one affecting the operators of funds (management directive)
  • one broadening the range of underlying investments and strategies that could qualify as UCITS (the products directive)
78
Q
A

LEVEL 6 Regulation and Compliance (17 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions