Unit 1 - 3. Associated Legislation and Regulation Flashcards

Question

The United Kingdom Takeover Code Unit 1 - 3. Associated Legislation and Regulation

Answer 1

POTM = Panel on Takeovers and Mergers, UK supervisory authority required under EU takeover directive. The Code is designed principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover. The Code is not concerned with the financial or commercial advantages or disadvantages of a takeover. There are 6 general principles of the code. Acting in concert = two persons actively cooperating through the acquisition of shares to obtain or consolidate control of a company. Dealing = acquisition/disposal of securities Interest in shares = a person with shares, derivatives on those shares etc Relevant securities = a) securities of the offeree company which are being offered for, or which carry voting rights b) equity share capital of the offeree company and an offeror c) and d) any related securities through rights etc.

Answer 2

It is felt appropriate that when investors buy or sell a significant stake in a company, such information should be made available to the investing public. This lets other decide the likely impact on the price. In the uk considered big if 3% or more.

Answer 3

EU harmonized disclosure rules via the Transparency Directive. Notification requirement is triggered when the size of holding changes between thresholds. 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%. Must inform the issuer, who will inform the market. Super - equivalence, EU member states can exceed the rules. UK does, requires disclosure at 3%, and every percentage point after. This needs to be reported to writing to the company within two business days. Company is required to maintain a register of interest.

Answer 4

A UK pubic company can send a written notice to any person that a company knows/suspects and ask them to confirm whether they are holding any shares and how many. Can ask ex shareholders for up to 3 years.

Answer 5

FCA requires transactions to be reported if they involve authorised firms and most designated investments. Transaction reporting enables review of transactions after the fact to monitor for market abuse and insider dealing etc. Trade reporting is to feedback market depth and liquidity, a measure of market transparency. Both counter parties must each report the trade unless agreed one party can report on behalf of both, or a third party can. Non-EEA entities do not have a reporting obligation, including EEA branches of third country firms.

Answer 6

``` EMIR = European Market Infrastructure Regulation SSR = EU Short Selling Regulations SFTR = Securities Finance Transaction Regulation ``` SFTR, new EU legislation, aims to enhance transparency and enable regulators to monitor risk by: - introduce reporting requirements for securities finance transactions - introduce limitations on the reuse of collateral EMIR - all trades in relation to derivative contracts must be reported under EMIR to a trade repository.

Answer 7

Trade reporting is automatic for all trades on the LSE's electronic order books. Off-order book transactions need to be reported within three minutes. Trade reporting is only required from member firms and the responsibility for trade reporting rests with the more senior party to the trade ie the market maker member firm. If the two parties are the same seniority, the selling party must report the trade.

Answer 8

DPA 2018 has wider remit than GDPR (EU) Principles 1. processing must be lawful and fair 2. purposes of processing must be specified, explicit and legitimate 3. personal data must be adequate, relevant and not excessive 4. personal data must be accurate and kept up to date 5. personal data must be kept for no longer than is necessary 6. personal data must be processed in a secure manner

Answer 9

ICO = The Information Commissioner's Office Mission = uphold information rights in the public interest, promote openness by public bodies and data privacy for individuals. All entities classified as data controllers that process personal data must register with the ICO. Maximum penalty: £17.5m or 4% of worldwide turnover, whichever is higher. Failure to comply with principles Standard penalty: £8.7m or 2% of worldwide turnover, whichever is higher. Infringement of principles such as administrative requirements

Answer 10

EU General Data Protection Regulation Scope: applies to both data controllers and processors, unlike UK DPA which is only data controllers. Also covers data outside EEA which related to offerings in the EEA. DPO: Data protection officer, mandatory for certain organizations. Fines: 4% of annual worldwide turnover or if greater, £17.5m for breaches of certain provisions, up to 2% (or £8.7m is greater).

Answer 11

MiFID = Markets in Financial Instruments Directive 2007, provides investor protection rules across the EEA. From 1/2021, UK has onshored to be 'UK MiFIR', regulation is the same as MiFID 2 Treasury has granted temporary transitional powers until 3/2022 Passporting within the EEA. Allows member states, authorized firms to provide investment services in another member state without requiring further authorization. The state providing the authorization is called the home state, the other state is the host state. Passporting same for both MiFID and UK regulated activities, but Ancillary activities cannot be passported on their own, must be with a main activity. Instruments not covered by MiFID - cash deposits - spot FX

Answer 12

Since MiFID 1, new factors/products have come into the market, so EU updated it and added MiFIR Regulation is directly applicable in the laws of the member states and does not require national implementing legislation. (unlike a directive) - Wider scope of products, such as structured deposits and emission allowances. - transparency requirements widened

Answer 13

UCITS = Undertaking in Collective Investments in Transferable Securities Set of regulatory standards for open-ended funds across the EU with the aim of facilitating cross border trade. If fund is setup with UCITS rules, can be sold across EU subject to local tax and marketing laws. Passporting for UCITS from home state to host state. Management directive, products directive for UCITS. KIID (key investor information documents)

Answer 14

Alternative Investment Fund Managers Directive Scope is broad, and with few exceptions, covers the management, administration and marketing of alternative investment funds (AIFs). Focuses on regulating the fund manager rather than the AIF. An AIR is a collective investment not subject to UCITS regime.

Answer 15

European Markets Infrastructure Regulation EU regulation on derivatives, central counterparties and trade repositories. Aim is to improve transparency and reduce risks associated with the derivatives market. EMIR relates to the OTC market.

Answer 16

Principle 4 of the Principles for Business 'firm must maintain adequate financial resources'. Capital resources and liquidity resources. Standards for investment firms are set out in GENPRU - The General Prudential Sourcebook BIPRU - The Prudential Sourcebook For Banks, Building Societies and Investment Firms IFPRU - The Prudential Sourcebook for Investment Firms 3 pillar approach under the CRD pillar 1 - minimum capital requirements. pillar 2 - supervisors decide if additional capital should cover risks not covered in pillar 1. pillar 2 - disclose information about risks, capital and risk management. Capital is broadly split into three tiers Core Tier One Capital Tier Two Capital Tier Three Capital

Answer 17

Basel 3 = EU capital adequacy framework, prescribed capital ratios. CRD IV 2013 1. Banks should hold more and better capital 2. new governance framework 3. create single rulebook CRD V 2020/22 CRD = Capital Requirements Directive