Revision Hotpoints Flashcards
Describe the PRA
Prudential regulation authority
A subsidiary of the Bank of England (BoE)
PRA responsibilities - On April 2013, the PRA became responsible for the (prudential) regulation and supervision of:
O Banks O Building societies O Credit unions O Insurers O Major investment banks
PRA = (prudential) REGULATION AND SUPERVISION
Firms regulated by the PRA are called “PRA-authorised firms”, and also “dual-regulated firms” as, whilst the PRA regulates PRUDENTIAL issues (I.e. Acting with due care and consideration), the FCA regulates firm’s CONDUCT
NOTE that the PRA is like a sheep pen, regulating the sheep’s movements, whereas the FCA looks after the sheep’s conduct (like a sheepdog)
Describe the FPC
Financial policy committee
An official committee of he Bank of England (BoE)
Focused on the macro-economic (big/overall picture) and financial issues that may threaten the UK’s long-term growth prospects
The FPC’s PRIMARY objective is to identify, monitor and take action to remove/reduce systemic risks, with a view to protecting and enhancing the resilience of the UK financial system
The FPC will address any risks it finds by passing them on to the PRA, which is obliged to act
The FPC’s SECONDARY objective is to support the UK government’s economic policy
The FPC is chaired by the governor of the Bank of England (Mark Carney)
Other members of the FPC include the PRA chief executive (also the Bank of England deputy governor for prudential regulation) and the FCA chief executive
Describe the FCA
Financial conduct authority
The FCA inherited most of the FSA’s roles and responsibilities, and also adopted the FSA’s legal corporate identity, I.e. The FCA is the new FSA
The FCA regulates the UK’s financial services industry (see above). FCA = CONDUCT
FCA’s aims:
O Protect consumers
O Ensure the finance industry remains stable
O Promote competition between financial service providers
The FCA has powers of:
O Rule-making
O Enforcement
O Investigation
The FCA uses its powers to protect and regulate the financial services industry
NOTE that the PRA is like a sheep pen, regulating the sheep’s movements, whereas the FCA looks after the sheep’s conduct (like a sheepdog)
List the JFSC’s ‘four regulatory laws’, which provide the JFSC’s legal basis for overseeing regulated businesses, as well as providing it with various powers
Remember BIFCS (The four regulatory laws pack a PUNCH). Also note the changes in dates from top to bottom
Banking business (Jersey) law 1991 Insurance business (Jersey) law 1996 Financial services (Jersey) law 1998 Collective investment funds (Jersey) law 1988
Describe the JFSC’s powers over regulated businesses, e.g. Trust company/money service, etc
Think about what the JFSC’s powers might be:
X Conduct on- and offsite supervision (When combined with the Commission law)
X Revoke the license of a regulated business
X Refuse to license an applicant
X Set conditions on a licence
X Issue a direction, requiring a regulated business to take/not take specific action
X Appoint a manager to manage the regulated business
X Issue public statements to warn the public and/or censure the regulated business
X Issue codes of practice, setting standards that regulated businesses must meet, e.g. Conduct of business rules, or financial resource requirements
X The four regulatory laws (BIFC) also provide for criminal offences to be committed where (inter alia) a person conducts a financial services business WITHOUT the relevant license to do so from the JFSC, or provides false/misleading info to the JFSC
Various tools to allow it to carry out effective supervision:
X Able to request information and documents be provided
X Conduct investigations
X Search and enter premises (with a warrant)
What factors does the JFSC take into account when considering applicants for category A permits to practice insurance business in Jersey
X Stature of the applicant
X Home country supervision the applicant is subject to
X Confirmation is also required from the home country supervisor
Note that category A permits can carry conditions, at the JFSC’s discretion
What factors does the JFSC take into account when considering applicants for category B permits to practice insurance business in Jersey
Remember as CRIPES (as in “CRIPES, the things I need to do for a category B permit!”)
CAPITAL - the paid up share capital of the applicant and the level of free capital and reserves, compared with premium income
REINSURANCE arrangements made/to be made by the applicant
INSURANCE - The nature of risks to be insured
PERSONNEL - Whether fit and proper persons are employed by/associated with the applicant in the management, control and audit of its operations
EXPERTISE and knowledge in insurance matters available to the applicant
STANDING, reputation and nature of business of the owners and their combined level of free capital and reserves
Describe sensitive personal data, as is set out in the DPJL
Remember the COMMUNIST story
The DPJL creates a separate category for more sensitive personal info, as below:
Vladimir’s RACIAL/ETHNIC ORIGIN was Russian Slav. His POLITICAL VIEWS were communist. Naturally, this meant his RELIGIOUS VIEWS were atheist, and he was a MEMBER OF A TRADE UNION. He had no issues with HEALTH, EITHER PHYSICAL OR MENTAL, and had an excellent SEX LIFE. His criminal record was clean, with no OFFENCES COMMITTED, OR ALLEGED TO HAVE COMITTED. As such, he had no CRIMINAL CONVICTIONS OR SENTENCES
Note that info held about an individual falling into any of the above categories requires a much higher level of security and care in its use
Describe the eight data protection principles of the DPJL
In order to protect the rights of individuals, organisations must comply with the eight data protection principles set out in the DPJL legislation, and be notified with the data protection commissioner
X Info must be obtained and processed fairly and lawfully
X Info can only be held for the specified purpose it was gathered for, and shouldn’t be further processed in a manner incompatible with that purpose
X Info must be adequate, relevant and not excessive for the purpose
X Info must be accurate and up to date
X Info mustn’t be kept for longer than necessary for that purpose
X Personal data shall be processed in accordance with the rights of data subjects under the law
X Adequate technical and organisational measures should be taken against unauthorised and unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data
X Personal data shall not be transferred to a non-EEA country or territory, unless that country/ territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data
Describe the term “processing”, as set out in the DPJL
The carrying out of any operation on any personal info, including obtaining, holding, using or disclosing the info. Essentially, anything you do with personal info is likely to fall within the term ‘processing’
What are the rights of customers under the DPJL/data protection (Jersey) law 2005
The 2005 law provides a number of enhanced rights for individuals, which financial institutions should be aware of:
X Right of access to personal data held about them
X Right to request an organisation stop processing personal data about them which causes harm or distress
X Right to request an organisation stop processing personal data for direct marketing purposes
X Right to request an organisation to ensure that no decisions are taken which significantly affect an individual and are solely based on the processing by automatic means
X Right to compensation for any breach of the law which causes damage or distress
X Right to apply to the court to have inaccurate data rectified, blocked, erased or destroyed
Further details on these rights can be found within part 2 of the DPJL
Describe the data arrangements financial organisations must put in place to secure customer data, and protect it in the event of a disaster, one of the implications of the DPJL for financial organisations
Data must be secure, and alternative arrangements/disaster recovery plans must be put in place to protect against something happening that results in loss of data, whether in a paper/electronic format:
O Data subject access requests should be verified to ensure identification
O Data which the company is required to provide must be supplied within 40 days of request. Note this is the maximum term, and data should be provided ASAP
O Employees should be made aware of their obligations and understand what to do if a request for information (aka a subject access request) is received
Describe the JFSC’s key purpose and aims
Key purpose - To maintain Jersey’s position as an international finance centre with high regulatory standards by:
X Reducing risk to the public of financial loss due to dishonesty, impotence, malpractice or the financial unsoundness of financial services providers
X Protecting and enhancing the Island’s reputation and integrity in commercial and financial matters
X Safeguarding the Island’s best economic interests
X Countering financial crime both in Jersey and elsewhere
Aims:
X Ensure that all entities are authorised meet fit and proper criteria
X Ensure that all regulated entities are operating within accepted standards of good regulatory practice
X Match International standards in respect of banking security, trust company business, insurance regulation, anti-money laundering (AML) and terrorist financing defences (CFT)
X Identify and deter abuse and breaches of regulator standards
X Ensure that the JFSC operates effectively and efficiently, and is accountable to the States of Jersey
X Ensure that all entities are authorised meet fit and proper criteria
X Ensure that all regulated entities are operating within accepted standards of good regulatory practice
Describe operational risk, an additional requirement in place for regulated banks in Jersey
Remember the FALLOUT story
The risk arising from execution of a company’s business functions. As such, companies require appropriate policies/processes/procedures for managing operational risk in all material products/activities/processes/systems. These include:
The courier laid out the EVALUATION AND DELIVERY of a plan to rob a shop with Dogmeat, as well as the DOCUMENTARY AND LEGAL RISK of doing so. This would be good PROCESS MANAGEMENT, especially in the event of SYSTEMS FAILURE. It was just him, reducing the risk of INTERNAL/EXTERNAL FRAUD. On their way in, the greeter-bot warned about IMPROPER ACTIVITIES in the toilets, and a sign was displayed at the entrance, about EMPLOYMENT PRACTICES AND WORKPLACE SAFETY. At each of the tills, there was a note on HANDLING OF CUSTOMER INFO. The manager’s office had a lot of PHYSICAL DAMAGE, but they found the key to the safe behind a list of CLEARLY DEFINED EMPLOYEE DUTIES. Inside the safe, they found cash, as well as a nuka cola RISK ASSESSMENT OF NEW PRODUCTS PRE-LAUNCH. Upon leaving, the courier reflected that the plan had had a REGULAR REVIEW OF OPERATIONAL RISK PROFILES, as well as BUSINESS CONTINUITY PLANS.
Describe risk management controls, one of the requirements for regulated banks in Jersey
Processes
Structures
Resources
Information systems
Reporting arrangements
Define the three possible avenues open to a foreign services provider under the U.K. Financial Services Act 1986 to provide investment services into the UK (Under Sections 86, 87 and 88 of the Act, respectively)
UCITS
Designated territory status
Apply for authorisation
List the various international regulators/organisations the JFSC is either a member of or associated with
IOSCO - the international organisation of securities commissions (member)
OGIS - the offshore group of insurance supervisors, (member)
IAIS - the international association of insurance supervisors, (member)
GIFCS - the group of international finance centre supervisors. Via its membership of the GIFCS, the JFSC works with:
x BIS - the Basel committee on banking supervision
x FATF - the financial action task force (on money laundering)
OECD - the organisation for economic cooperation and development, via the UK’s membership and official declaration of the Island’s association, dated 19 July 1990
The United Nations global programme against money laundering (participant)
What’s the IMF’s definition of an offshore finance centre?
Large number of financial institutions engaged primarily with non-residents
Financial system with external assets or liabilities out of proportion to the domestic economy
Centres which provide some or all of the following:
X Low/no tax
X Moderate/light regulation
X Banking secrecy/anonymity
What are the implications of the DPJL/data protection (Jersey) law 2005 for financial organisations
Organisations must take steps to ensure that they don’t breach the legislation:
X The company must provide the customer with specific info on collecting their personal data, including:
O Identity of the data controller (usually the organisation)
O The purposes for which their personal data will be used
O Any other relevant info, such as any disclosures likely to be made to third parties
X The company must obtain consent to divulge info to other associated companies for the purpose of cross-selling or marketing their products (usually, the client ticks a opt-in or opt-out box for this)
X If the personal data is maintained elsewhere, or via a data holding centre, the customer should be advised of this in the terms and conditions of service
X Any company holding personal info must be registered to hold such data with the relevant data protection authority in that jurisdiction
X The purposes for which they hold the data must be specified
X The data must be accurate and up to date. This would be done either annually, or on an ongoing basis, usually in conjunction with trigger events, such as changes to a customer’s account profile
X The data must be secure, and alternative arrangements in place by way of disaster recovery plans should have something happen resulting in loss of data, whether in a paper or electronic format:
O Data subject access requests should be verified to ensure identification
O Data which the company is obliged to provide must be supplied within 40 days of the request. Note that this is the maximum term, and data should be provided as soon as it’s available
O Employees should be made aware of their obligations and understand what to do should a request for information, known as a subject access request, be received
What case is an example of conditional assent and counter offer?
Hyde vs wrench (1840)
The defendant offered to sell an estate to the plaintiff for £1,000. The plaintiff made an offer of £950, which the defendant rejected. The plaintiff then wrote to say he was prepared to pay the full amount
It was held that no contract existed - the offer was no longer open as the counter offer had destroyed it
Payne vs cave (1789) also provides an example of this
What case is an example of request for information?
Harvey vs facey (1893)
The plaintiff contacted the defendant to ask what the lowest price would be for bumper hall pen.
When the defendant telegraphed back the lowest price, the plaintiff replied that he would buy for that price
It was held that the second telegraph was only information, and not an offer to sell, only an indication of the price
Request for information - this doesn’t destroy the offer, but attempts to clarify matters. It can be hard to determine whether the statement from the offeree to the offeror on the latter’s original offer is simply a request for info, a counter offer
Define and describe acceptance in the context of contract law
Remember the DREDD ‘clear and unqualified’ story
Acceptance is the unconditional consent to the terms of an offer, and various rules are applied as follows:
Judge Dredd was cuffing a crook when he remembered “when I handcuff him, surrender must be CLEAR AND UNQUALIFIED”. The crook then COMMUNICATED DIRECTLY BACK TO THE OFFEROR “fuck you”. Dredd was relieved, as SILENCE CANNOT AMOUNT TO ACCEPTANCE. He’d head about this FROM THE PROPER AUTHORITY, the chief judge, who’d also told him “you can beat him up beforehand”, as SUBSTANTIAL PERFORMANCE (COMPLETION) ALMOST AMOUNTS TO ACCEPTANCE. The big book of law added that surrender MUST BE BY THE MODE OR METHOD LAID DOWN BY THE OFFEROR. The crook realised he’d best accept fast, WHEN THE OFFER IS STILL OPEN. Trying to be smart, he asked “SUBJECT TO CONTRACT?” Dredd gave him a whack and replied “BY OPERATION OF THE LAW”
Judge Anderson’s lesson of the day - “The general rule, as shown above, is that an acceptance has no legal effect until it’s been communicated to the offeror”
Define and describe market abuse, and the seven types of behaviour that FSMA 2000, s118, says it falls into
Remember the DREDD MARKET ABUSE story
Behaviour, by one person alone or two or more jointly or in concert, which:
X Occurs in relation to qualifying investments traded in a prescribed market
And
X Falls into one or more of the seven types of behaviour set out below:
Dredd had received a report from FSMA 2000 on reports of INSIDER DEALING at a residence. Upon arrival, a naked man answered the door, who Dredd arrested for IMPROPER DISCLOSURE. The perp knew Dredd was coming, due to MISUSE OF INFORMATION, but that didn’t stop Dredd arresting him for both MANIPULATING TRANSACTIONS and MANIPULATING DEVICES. When he was about to leave, the nude man muttered “what about the pictures of me!?”, for which Dredd then charged him for DISSEMINATION, then once more, upon finding out he didn’t look good in the photos, for DISTORTION AND MISLEADING BEHAVIOUR
List the 11 principles of business listed in the FCA handbook that all regulated firms are expected to abide by
Remember GRITTY the dog
A pedigree pooch named gritty is going on his first flight. He enters the plane and a beautiful stewardess says “ENTER GRITTY”. The SKILLful stewardess’ name is DILLY GENCE, and she will take CARE of gritty. Gritty is owned by the lady in charge of MANAGEMENT AND CONTROL, who wants to raise some money, as that would be good FINANCIAL PRUDENCE. When they arrive, dilly takes gritty there, where the MARKET CONDUCT a thorough fitness check. Dilly then tries to raise CUSTOMER INTERESTS in buying gritty. Dilly handles the COMMUNICATION WITH CUSTOMERS, who notice that gritty’ eyes are close together. “This is a CONFLICT OF INTEREST! This is no RELATIONSHIP OF TRUST” they say. Dilly watches the CUSTOMER ASSETS leave. She thinks “I’ll need to check the REGULATIONS WITH REGULATORS”
