3. Associated Legislation and Regulation

Question 1

What is the UK MAR and its statutory purpose?

Answer 1

It is the Market Abuse Regulation, now UK MAR post-Brexit, aimed at preventing insider dealing and market manipulation. (Section 1.1)

Question 2

What are the key updates from the Market Abuse (Amendment) (EU Exit) Regulations 2019?

Answer 2

• These include replacing EU bodies with UK ones,
• Limiting information sharing without reciprocity,
• Giving rule-making power to HM Treasury.

(Section 1.1.1)

Question 3

What does the FCA’s Market Conduct Handbook provide under UK MAR?

Answer 3

It offers non-binding guidance on market abuse issues and regulatory expectations. (Section 1.2)

Question 4

What are the three main offences of insider dealing under the CJA 1993?

Answer 4

Dealing, encouraging others to deal, and disclosing inside information. (Section 2.4)

Question 5

What defines ‘inside information’ under CJA 1993?

Answer 5

Information that is specific, not public, and likely to affect the price of securities. (Section 2.4)

Question 6

What are the four forms of market manipulation under UK MAR Article 12?

Answer 6

Manipulating transactions, devices, dissemination of false info, and benchmark manipulation. (Section 3.1)

Question 7

What is the purpose of the Price Stabilisation rules?

Answer 7

To allow stabilising managers to support new issues and avoid market abuse allegations. (Section 2.6.3)

Question 8

What is ‘money laundering’ under POCA 2002?

Answer 8

The process of disguising criminal proceeds as legitimate funds. (Section 4.1)

Question 9

What are the three stages of money laundering?

Answer 9

Placement, layering, and integration. (Section 4.2)

Question 10

What is the significance of MLR 2017 for firms?

Answer 10

It sets training and procedural obligations to combat money laundering and terrorist financing. (Section 4.3.1)

Question 11

What are the main offences under POCA 2002?

Answer 11

Concealing, arrangements, acquisition/use/possession, failure to disclose, and tipping off. (Section 4.3.2)

Question 12

What does the Bribery Act require from firms?

Answer 12

Adequate procedures to prevent bribery and monitoring to adapt to changing risks. (Section 5)

Question 13

What are firms’ obligations for AML record-keeping?

Answer 13

To retain identity and transaction records for five years post-relationship or transaction. (Section 6)

Question 14

What is the purpose of the DTR (Disclosure and Transparency Rules)?

Answer 14

To ensure prompt, fair, and confidential disclosure of inside information and promote market transparency. (Section 7.1)

Question 15

What is required under the Transaction and Trade Reporting rules?

Answer 15

Timely trade reports, including key trade details, submitted to the relevant authority. (Section 8)

Question 16

What are the six principles of the Data Protection Act 2018?

Answer 16

Lawfulness, fairness, purpose limitation, data minimisation, accuracy, and integrity/confidentiality. (Section 9.1)

Question 17

What is the role of the Information Commissioner under the DPA?

Answer 17

To enforce data protection law and levy fines for breaches. (Section 9.2)

Question 18

What are ‘prudential standards’?

Answer 18

Rules ensuring financial stability, capital adequacy, and risk control in regulated firms. (Section 10)

Question 19

A trader learns confidential pricing information about a company ahead of a major acquisition and buys shares before the news is made public. What offence may have been committed?

Answer 19

Insider dealing under the Criminal Justice Act 1993 (Section 2.4)

Question 20

An investment firm receives large cash deposits from a client without verifying the source of funds. Which legislation is most relevant?

Answer 20

Proceeds of Crime Act 2002 and Money Laundering Regulations 2017 (Sections 4.1–4.3.1)

Question 21

A listed company is slow to disclose inside information that may affect its share price. Which rule may have been breached?

Answer 21

Disclosure and Transparency Rules (DTR) – timely disclosure obligation (Section 7.1)

Question 22

A compliance officer notices unusually large transactions from a politically exposed person (PEP), but the client is long-standing and well-known. The officer chooses not to investigate further. What regulatory issue arises, if any?

Answer 22

Failure to apply enhanced due diligence and suspicious activity reporting duties under MLR 2017. Long-standing relationships do not remove AML obligations. (Section 4.3.1)

Question 23

An equity analyst publishes a research report recommending a company’s shares while her firm holds a short position in the same company. The report does not disclose this. Is there a breach?

Answer 23

Yes – this may constitute market manipulation or misleading conduct under UK MAR, and may also breach FCA rules on conflicts of interest in investment research. (Sections 3.1 and 1.2)

Question 24

A firm deletes all client identity verification records 18 months after an account is closed, citing GDPR minimisation principles. Is this compliant?

Answer 24

No – under AML regulations, firms must retain identity and transaction records for at least five years after the end of the relationship, even if GDPR encourages data minimisation. (Section 6)

Question 25

: A listed firm is preparing a strategic merger. Management argues that withholding disclosure is necessary to avoid jeopardising the deal. The delay lasts three weeks. Is this acceptable under DTR?

Answer 25

Only if the conditions for delaying disclosure are strictly met – including ensuring confidentiality and that the delay does not mislead the public. Otherwise, this could be a breach of DTR 2.5. (Section 7.1)