Regulation of Financial Markets Flashcards
(19 cards)
What is the purpose of EU Regulation of financial markets?
‘Harmonisation’ of financial services market, same laws throughout EU - allows passporting
Implications of EU Laws on member states?
Immediately binding, many countries adopt later as their own law. ‘Vertical direct effect’.
What is MIFID - also what does it allow?
Markets in financial instruments directive, single authorisation (passporting), obtained from home state regulator, host state conduct of business rules apply.
When was MIFIDii brought about and what does it do?
2018 - to distinguish between investment services/activities (core) + ancillary services (non-core), increased transparency requirements, smaller commodities allowed to be held, OTF’s, More disorderly market rules (high speed/tech), increased info on services provided is required.
Give examples of MIFIDii core activities and services?
trading, send/receiving orders, execution of client orders, dealing on own account, managing investments and portfolios, advice, underwriting, placing, operating MTFs + OTF’s.
Give examples of MIFIDii non-core activities?
(money) Safe-keeping, investment admin, advice on M+A, FX services, granting credit (margin) and research.
What are considered financial instruments under MIFIDii?
Transferable securities
Money market instruments
Units in collective investment undertakings
Derivatives
What is MIFIR and what does it do?
Intro’d alongside MIFIDii in 2018, largely about reporting requirements for DTRs + extends scope into other assets
How are collective investment schemes reguated?
Governed by FCA, rules called COIC - also apply to AIFs. Depends on the type of CIS, regulated = centrally marketable - (Blackrock Global Funds). Unregulated scheme or fund is like a hedge fund which has specific marketing laws. Bridgewater Associates (Ray Dalio Hedge fund).
Whats the UCIT’s directive?
Creates a single market for collective investment schemes, authorised and traded anywhere in the EU. Local tax and marketing laws apply.
UCITs iii implications?
Increased passporting, simplified prospectus, big range of financial directives, allows more products to be included.
UCITs iv implications?
Passport management, procedures for cross border fund merges, replaced prospectus with Key Investor Info Document (KIID).
UCITs V implications?
Makes depositories rules tougher
AIFMD - Alternative Investment Fund Management Directive
Governs management, admin, marketing of AIF’s, regulation of them
Main requirements under AIFMD?
Authorisation by their home state regulator, where AUM exceeds 100m euros when using debt and 500m euros with no leverage. Broker requirements - must be financially good, quarterly/semi/annual reporting required depending on circumstances.
What are EMIR’s?
European Market Infrastructure Regulations
Whats the purpose of EMIRs - requirements?
Requires OTC derivatives to be reported and risk managed. Three main requirements - standardised trade reporting, compulsory CCS clearing, risk management procedures.
What is FATCA?
Foreign Accounts Tax Compliance Act
Who does FATCA apply to?
US Law to prevent US Citizens using offshore banking, applies to non-US financial institutions. 30% holding tax on payments of US Source income to non-US financial institutions. All FFIs are required to provide info on US Customers.
