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IMC Unit 1 -Chapter 3 > Section 3.2 - UK regulation > Flashcards

Section 3.2 - UK regulation Flashcards

1
Q

Overview of UK Regulatory Structure

A
  • FSMA renamed FSA introduced in 2012 and sets out regulatory framework in the UK by:
  • Establishing Macro-prudential regulator, the FPC, within the BOE to monitor systematic risk
  • PRA put in charge of prudential regulation and PRC as governing body of PRA
  • FCA intoduced to regulate both retail and wholesale markets with aims of improving consumer protection.

FSA - Financial Service Authority
FPC - Financial Policy Committee
PRA - Prudential Regulation Authority
PRC - Prudnetial Regulation Committee

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2
Q

What is the role of the FCA

A
  • FCA is overseen by the treasury and their responsibility covers the conduct of banks, investment firms and insurers
  • They aim to promote healthy competiton and intergrity of markets
  • The FCA has powers to intervene to impose on requirements, or even ban, products
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3
Q

What is the role of the PRA

A
  • Within the BOE, the PRA is prudential regulator for larger, complex investment firms
  • Aims to ensure the safety and soundness of firms its regulates. - It supervises firms in relation thier resillance and helps them if firms fails.
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4
Q

What is the role of the FPC

A
  • Aims to monitor the financial system as a whole and identify risks to its stability - Can make reccommnedations to PRA and FCA and also intervene if needed.
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5
Q

How is the FPC seen as transparent

A
  • By publishing two financial stability reports each year and keeping a record of its meetings. It should meet at least quartley
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6
Q

What is dual regulated firm

A

A firm which is authorised and supervised by the FCA and PRA.

Consent - FCA can give or refuse consent
Consult - When a firm chnages structure, the PRA must notify the FCA

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7
Q

What are criminal offences under the FSMA

A
  • A person falsely describing themselves as exempt or authorised
  • A person giving misleading a market or investors by making dishonest statements

2 years max jail time

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7
Q

What does it mean when it refers to ‘authorized person’

A
  • Only authorized persons and exempt persons can only undertake investment business in the UK.

Two kinds of authorised people:
* Those refered in FSMA part 4a permission
* Person authorised from another EEA state - Under MiFID

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8
Q

What groups are defined in the Regulated Activites Order 2001

A

Specified Investments and regulated activties

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9
Q

What is the objective of Payments System Regulator

A
  • Intorudced in 2015 as a subsidary of the FCA
  • The aim of PSR is to promote competiton, interest and devlopment of businesses and its consumers
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9
Q

What are specified investments

A

They include all investment instruments excluding physical assets e.g. land and commodities

Provision of credit (regulated mortgages) are specified investments under the FCA

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10
Q

What is listed as regulated activites

A
  • Arranging mortgage transactions
  • Accepting deposits
  • Issuing elctronic money
  • Authorization is required if the activity is carried out with one or more specified investments
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11
Q

What is the main objective of CMA

CMA - Competitons of Markets Authority

A
  • They are more concerned with takeovers rather than acqusitions as there may be more issues that could affect public interest.
  • Acts a indpendent competiton authoirty
  • Have 40 days to undertake intial merger and if the CMA believe the merger will ‘substantially lessen the competiton then it has the power to prohib the merger
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12
Q

What requirments must be met for CMA to investigate all mergers meet turnover test

A
  • Turnover test is met when a target company has at least UK tunrover of £70m
  • Share supply test is met when a merging companies will supply at least 25% of goods and services
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13
Q

When can BEIS intervene instead of CMA

BEIS - Department of Business, Energy and Industrial strategy

A

When there are public interest issues

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14
Q

What are the aims of GDPR

GDPR - General Data Protection Regulation

A
  • Replaces Data Protection Act (1998) and aims to protect the rights and privacy of consumers.
  • ICO works in collaboration with GDPR to monitor implementation and compliance with GDPR
  • Ensure anyone dealing with personal infomation to comply with it being fair, transparent and confiedential

ICO - Information Commissioners Officer

15
Q

When should firms reach out to ICO

A
  • When there is Personal data breach - Organisations must notify the ICO within 72 hours when there is a breach:
  • Can be up to £20m or 4% of global tunrover (which ever one is greater) for certain improvisions and £10m or 2% of global tunrover for standard provisions
16
Q

What is the role of PTM

PTM- Panel on Takeovers and Mergers

A
  • Enforces city code on takeovers and mergers
  • Acts as referee to ensure shareholders of both companies are treated equally fair
17
Q

How can the PTM remain fair in regards to voting rights

A
  • Any bidder who acquires 30% more of voting rights must make a cash offer to all other shareholders, higher than the previous year
  • An offer document must be sent to shareholders of the target company 28 days after intial offering.
  • Any offer must remain open for a minimum of 21 days after its intial posting and should notify its shareholders of its views within 14 days
  • If the bidders stake reaches 50%then the company is required to keep the offer open for the acceptance of remaining shareholders.
  • If company owns more than90%of shares then it can force minority shareholders to sell their shares
18
Q

What trades is the PTM levy payable/not payable in

A

Payable trades:
* Equity share capital
* Transferable secruties
* US depositaries receipts

Non Payable trades:
* Covered warrants
* Debentures and other debt secruties
* Preference shares

19
Q

What is the objective of the Trustee Act 2000

A
  • Allows trustee to make any type of investment - including land and property
  • Does not take into consideration pension schemes and unit trusts under Charities Act 2011
20
Q

What devlopments were under Pensions Act 2004

A
  • Created TPR - Promotes members of occupational scheme and reduces risk
  • Intoruced PPF - Covers up to 100% for exisitng pensioners and 90% for those who havent retired yet.

PPF - Pension Protection Fund

21
Q

What changes were made under Pension Act 2008

A
  • Requires all eligable job holders (22+ with at least £10,000 annual income) to be enrolled into a qualifying scheme
  • Government created NEST to all employers can have access to a suitable scheme

NEST - National Employment Savings Trust

22
Q

How can DC pension scheme be accessed?

A
  • Taking an UFPLS - typically 25% of UFPLS is tax free
  • Puchasing a lifetime annuity with funds
  • Enter flexi-access drawdown plan - PLCS’s up to 25% can be taken out of pension pot
23
Q

What are the options of entering a drawdown under FCA

A
  • Customers enetering a drawdown will be given 3 options:
  • Choosing their investment pathway
  • Choosing their own investments
  • Sticking with investments they already have
  • If a client chooses the investment pathway then pension companies will offer investors a single investment solution where 75 bsp will apply.

FCA introudced this rule in 2011 to make sure everyone has access to good and simple invetsments that match their retirement goals.

24
Q

What is the main objective of Pension Scheme Act 2021

A
  • Gives the Pension regulator stornger power - which can affect DB scheme - Creates new crimininal offences and can impose civil penalties up to £1m
25
Q

What government regulations must trustees meet

A
  • Oversee and assess the impact of climate related risks - provide annaul report
  • The regulator has the power to enforce these laws by issuing fines up to £5000 to indivdual trustees and £50,000 to corporate trustees
  • Will be implemented in October 2021 for firms with £5bn in assets and October 2022 for firms with £1-5bn in assets
26
Q
A

IMC Unit 1 -Chapter 3 (8 decks)

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