IMC Chapter 3 Key Facts Flashcards
(26 cards)
Describe European Union (EU) Directives
They are issued under section 58 of the European Treaty and have to be complied with by all EU Member States. The aim of a Directive is the harmonisation of laws across EU Member States
How does a Directive work?
A Directive prescribes a particular result to be achieved by a particular date. It is left to EU Member States to implement the Directive into national law.
What are the two methods of implementing a Directive?
- By primary legislation
- By delegated legislation under section 2 of the European Communities Act (1972)
What does MiFID enable an investment firm to do?
Enables an investment firm established in one EU Member State to operate throughout the European Economic Area (EEA) without separate authorisation by the Member States in which it does business. MiFID II came into effect in January 2018.
What do the Undertakings for Collective Investment in Transferable Securities (UCITS) Directives do?
Give automatic recognition in the U.K. to other collective investment schemes constituted in an EU Member State other than the U.K.
What does the Alternative Investment Fund Managers Directive (AIFMD) do?
Covers the management, administration and marketing of alternative investment funds (AIFs)
What does the European Market Infrastructure Regulation (EMIR) do?
Requires anyone who has entered into a derivatives contract to report and risk manage their derivative positions. Covers OTC derivatives, central counterparties and trade repositories.
What does the Benchmark Regulation (BMR) do?
Addresses the risk that benchmarks are susceptible to manipulation.
What is the Foreign Account Tax Compliance Act (FATCA)?
A U.S. law to prevent tax evasion by US citizens using offshore banking facilities.
What is the Common Reporting Standard (CRS)?
An information standard for the automatic exchange of tax and financial information on a global level. Developed in 2014 by the Organisation for Economic Co-operation and Development (OECD)
What are the three U.K. regulatory bodies?
- The Financial Conduct Authority (FCA) - responsible for regulating the conduct of business
- The Prudential Regulation Authority (PRA) - responsible for the prudential regulation of banks, insurance companies and systemically important investment firms
- The Financial Policy Committee (FPC) - responsible for macro-prudential (systemic) regulation of the financial system
What are the FCA’s three operational objectives?
- The consumer protection objective
- The integrity objective
- The competition objective
What is the Competition and Markets Authority (CMA)?
An independent competition authority. The Secretary of State at the Department for Business, Energy and Industrial Strategy (BEIS) will only intervene in exceptional cases where there are public interest issues
When must the CMA investigate a merger?
Where the merged company will control greater than 25% of the U.K. market, or where the U.K. turnover of the target firm exceeds £70m
Who is responsible for enforcing the City Code on Takeovers and Mergers?
The Panel on Takeovers and Mergers (PTM)
When is a bidder required to make a cash offer to other shareholders?
When acquiring more than 30% of voting rights of a company
When can the remaining shareholders of a company be forced to sell their shares?
When a company acquires 90% of another company
Who is the Information Commissioner?
The person responsible for regulating compliance with the General Data Protection Regulation (GDPR)
Who can undertake investment business in the U.K.?
An authorised person, passported under an EU Directive, or an exempted person. Investment persons classed as exempted do not require authorisation e.g. appointed representatives
Describe the Regulated Activities Order
It is where investment activities that require regulation are set out. It includes investments other than physical objects. Deposits and general insurance contracts are also regulated
What is the main purpose of Senior Management Arrangements, Systems and Controls (SYSC)?
To encourage firms’ directors and senior managers to take appropriate practical responsibility for their firms’ arrangements on matters of interest to the FCA. The common platform is a unified set of organisational requirements in SYSC 4-10 which applies to all firms except insurers, managing agents and the Society of Lloyds
Describe the Pensions Act 2004
Requires trustees to appoint their own actuary, auditor, legal and financial advisers. Trustees are responsible, in consultation with the sponsoring employer, to produce a statement of investment principles (SIP)
What is included in a statement of investment principles (SIP)?
Sets out in writing the trustees’ attitude to various issues, including:
1. The scheme-specific funding requirement
2. The nature of investments held by the fund
3. The risk of the fund
Must be reviewed every 3 years
Who must carry out a trustees’ investments?
Where the trust instrument allows, trustees may appoint an investment manager to carry out investment policies. Where the trust instrument does not allow this, the trustees must select investments themselves, although they must seek investment advice
