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FCA 2: Derivatives > Regulatory Requirements > Flashcards

Regulatory Requirements Flashcards

1
Q

who are the main market regulators in Europe?

A

Mainland: EBA, ESMA, EIOPA
UK: PRA, FPC, FCA

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2
Q

What are the main market regulators in Asia?

A
  • China – China Securities Regulatory Commission (CSRC)
  • Hong Kong – Securities and Futures Commission (SFC)
  • India – Securities and Exchange Board of India (SEBI)
  • Indonesia – Financial Services Authority (OJK)
  • Japan – Financial Services Authority (FSA)
  • Singapore – Monetary Authority of Singapore (MAS)
  • South Korea – Financial Services Commission (FSC)
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3
Q

what are the main market regulators in the US?

A
  • CFTC
  • the Fed
  • FINRA
  • NFA
  • SEC
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4
Q

who are the main market regulators in Latin America?

A
  • Argentina; CNV
  • Brazil; CVM
  • Mexico; SHCP
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5
Q

Who are the main regulators in MENA?

A
  • Dubai – Dubai Financial Services Authority (DFSA)
  • Saudi Arabia – Capital Markets Authority (CMA)
  • South Africa – Financial Sector Conduct Authority (FSCA), Prudential Authority (PA), South African Reserve Bank (SARB)
  • Nigeria – Securities and Exchange Commission (SEC), Central Bank of Nigeria (CBN)
  • Kenya – Capital Markets Authority (CBA), Central Bank of Kenya (CBK)
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6
Q

What are the main purpose of regulation?

A
  • maintain and promote fairness, efficiency, competitiveness, transparency and orderliness of the industry
  • promote understanding of the public of the securities and futures industry
  • provide protection for members of the public investing or holding financial products
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7
Q

what role do securities and derivatives exchanges have in regulation?

A

they are active regulators of their member firms themselves and the trading that takes place on the exchange. known as SROs (self-regulated organisations)

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8
Q

what is the IOSCO?

A

International Organisation of securities commissions.

association of organisations that regulates the worlds securities and futures markets, membership is the main securities commissions/ regulators from each country, regulates 95%> of global securities markets

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9
Q

what is the ISDA?

A

international swaps and derivatives association

trade organisation whose members are the main participants in the global OTC derivatives markets. responsible for the ISDA master agreement, also manage FpML and XML message standard for the OTC derivative industry

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10
Q

what was the situation with UK firms providing services prior to Brexit?

A

via EU MiFID UK firms were authorised to provide investment services to other member states via single authorisation across the EU

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11
Q

what is the situation with UK firms providing investment services post-Brexit?

A

UK firms have been required to create EU subsidiaries to serve EU clients, the overall business environment is still in flux

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12
Q

who has been granted limited housing as of april 2023?

A

clearing houses and securities depositories, systematic services domiciled in the UK

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13
Q

What is UK MiFID and when was it implemented?

A

complete transposition of EU MiFID by a combination of the FCA’s handbook, Treasury rules and Parliamentary legislation, implemented at the beginning of the transition period 31 Dec 2020

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14
Q

what passportable activities does MiFID include?

A
  • investment advice
  • underwriting activities
  • MTF, OTF and systematic internaliser facilities
  • investment actitivites
  • investment research
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15
Q

what is the CRD?

A

Capital requirements directive, part of MiFID and stipulates the requirements for regulatory capital a firm must hold

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16
Q

when was MiFID II implemented?

A

voted on in April 2014, actually implemented January 2018

17
Q

What di MiFID II achieve?

A
  • expansion in scope of firms that were covered
  • Investment firms could benefit from and EU passport by establishing branches
  • client classification was introduced
  • Investors gained further protection
18
Q

what firms are classified as MiFID firms in the UK?

A
  • firms managing investments
  • Firms operating MTF, OTF or acting as SIs
  • venture capital firms that meet certain criteria
19
Q

what is the role of the OSC?

A

Operations steering committee of the ISDA, targets to improve the operational infrastructure and regulation of the OTC derivatives industry, increased emphasis on collateral management and reconciliation

20
Q

what are the activities of the EBA?

A

European banking authority, activities include conducting stress testing, increasing transparency and identifying weaknesses

21
Q

what is the role of ESMA?

A

European securities and markets authority, establish EU-wide financial markets overseer by assessing risks and composing a single rulebook for EU financial markets

22
Q

what is ‘supervisory convergence’ that ESMA is responsible for?

A

where they are mandated to take an active role in building a common supervisory culture among national authorities to promote consistent supervision

23
Q

what is the role of the CSRC?

A

China securities regulatory commission, ministerial level institution that came into effect in 1999 to implement centralised and unified regulation of the nationwide securities market

24
Q

what is the role of the SFC?

A

Hong Kong securities and futures commission, responsible for orderly functioning of the markets, protecting investors and promote Hong Kong’s markets

25
Q

what is the role of MAS?

A

Monetary authority of Singapore- central bank as well as financial regulatory authority. administers all regulations that pertain to money, banking, insurance, securities and the financial sector as a whole as well as currency issuance.

26
Q

what does principles-based regulation mean?

A

shifting away from reliance on detailed rules and relying on more high-level principles to set the standards by which regulated firms must conduct business

27
Q

what are the key elements of the FCA’s principles-based approach?

A
  • broad standards
  • outcome-based regulation
  • increased senior management responsibility
28
Q

what does rules-based regulation stipulate?

A

based on strict, clearly defined but inflexible rules that must be followed by all

29
Q

what are the 11 FCA principles?

A
  1. integrity
  2. skill, care and diligence
  3. Management and control
  4. Financial prudence
  5. market conduct
  6. customers interests
  7. communication with clients
  8. conflicts of interest
  9. relationships of trust
  10. client’s assets
  11. relations with regulators
30
Q

what is the purpose of the FCA’s FTOC initiative?

A

fair treatment of customers, looks at what a fair deal for customers should actually mean

31
Q

what are the 6 consumer outcomes outlined under FTOC?

A
  1. FTOC in the company culture
  2. products and services marketed accordingly
  3. consumers provided with clear information and kept appropriately informed
  4. advice is suitable and takes into account their circumstances
  5. products should perform as firms have led them to expect
  6. consumers don’t face unreasonable post-sale barriers
32
Q

what are the 3 client categorisations?

A
  • retail client
  • professional client
  • eligible counterparty
33
Q

what is best execution?

A

requires firms to execute orders on the terms that are most favourable to their client

34
Q

what is the main difference between regulators in the EU versus the US?

A

EU is much more principles-based whereas the US is rules-based

35
Q

what is the Sarbanes-Oxley act?

A

set strict regulations on how companies manage their derivatives use and exposure as well as reporting it

36
Q

what is the role of the SEC in the US?

A
  • regulating options on currencies (ETD), individual stocks, stock indices
  • CBOE
  • ISE
37
Q

what is the role of the CFTC?

A

commodities futures trading commission, regulates all on-exchange derivatives not covered by the SEC, regulates all futures products and exchanges and all other options not covered by the SEC, draws its power from the Commodity exchange act

38
Q

what is the role of the NFA?

A

national futures association, provides regulatory programmes that safeguard the integrity of the derivatives markets, NFP organisation, financed exclusively from membership dues and fees paid by users

39
Q

what does the Dodd-Frank act contemplate?

A

mandatory clearing and trading on regulated facilities for many derivatives contracts with an exception for non-financial end users

FCA 2: Derivatives (9 decks)

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