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Investment Environment > the regulatory environment > Flashcards

the regulatory environment Flashcards

1
Q

Prudential Regulation Authority overlooked by

A

Bank of England

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2
Q

Financial Conduct authority overlooked by

A

HM Treasury

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3
Q

PRA + FCA

A

dual regulated firm : PRA - prudential regulation, FCA - conduct regulation

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4
Q

FPC (part of BoE ) issues

A

directions to PRA and FCA

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5
Q

role of government

A
  • economic policy
  • regulation
  • taxation
  • social welfare
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6
Q

Bank of England responsibilities

A
  • oversees financial mrkts infrastructure (FMI)
  • overview of the financial system
  • maintaining stability in the financial system
  • appoints chairman of takeover panel
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7
Q

The FPC

A
  • meet at least quarterly
  • monitors financial system and identifies risks to its stability
  • makes recommendations and has powers of intervention to ensure action is taken
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8
Q

ESMA objectives

A
  • investor protection
  • orderly markets
  • financial stability
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9
Q

Harmonisation: Financial services action plan (FSAP) objectives

A
  • create single EU wholesale market
  • achieve open and secure retail markets
  • create state of the art prudential rules and structures of supervision
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10
Q

PRA objective (FSA 2012)

A

to promote safety and soundness of PRA-authorised firms

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11
Q

EU General data protection regulation (GDPR)

A
  • harmonises data privacy laws and protects European citizens from privacy and data breaches
  • extra-territorial applicability
  • penalties (up to 4% of annual global turnover, or 20mill euro whichever is higher
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12
Q

FCA Strategic objective (FSA 2012)

A

to ensure relevant markets function well

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13
Q

FCA Operational objective

A

(PIC) consumer protection , integrity of UK financial system, competition - promoting efficiency

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14
Q

Temporary Product intervention rules (TPIR)

A
  • products can be banned for up to 12mnths without consultation
  • proactive approach => FCA tries to find permanent remedy or work to find another way to resolve problem
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15
Q

BLOCK 1

A

high-level standards:
PRIN
SYSC
COND
APER
COCON
FIT
TC

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16
Q

BLOCK 2

A

prudential standards

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17
Q

BLOCK 3

A

business standards:
COBS
CASS
MAR

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18
Q

BLOCK 4

A

regulatory processes:
SUP
DEPP

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19
Q

BLOCK 5

A

redress:
DISP
COMP

20
Q

BLOCK 6

A

specialist sourcebooks:
COLL

21
Q

BLOCK 7

A

listing, prospectus and disclosure (UKLA)

22
Q

Treating customers fairly (reinforces ppl for businesses 6)

A
  1. fair treatment of customers central to corporate culture
  2. products and services meet the needs
  3. consumers provided with clear info
  4. advice is suitable
  5. products and services meet expectations
  6. consumers do not face unreasonable post-sale barriers
23
Q

FCA’s 3 pillars of supervision

A

pillar 1: firm systematic framework - preventative in nature
pillar 2: event-driven work- reacting to crystallisation of conduct risk
pillar 3: issues and products - campaigns focused upon specific issues

24
Q

Fixed portfolio firms

A

firms who pose greater risk and have dedicated FCA supervisor

25
Q

Floating portfolio firms

A

smaller firms supervised through thematic work ( pillar 3)

26
Q

General prohibition (S19 FSMA 2000)

A

no person may carry on regulated acitivity in the UK unless an authorised person or an exempt person

27
Q

FCA disciplinary measures (RDC panel can enforce)

A
  1. withdrawal or variation or authorisation or approval
  2. prohibition (section 56 notices)
  3. restitution order
  4. public statements of misconduct and financial penalties
  5. prosecution
28
Q

regulated activity

A

specified activity undertaken with a specified investment

29
Q

specified acitivities

A
  1. dealing in invesmtents
  2. arranging deals in invesments
  3. maaning investments
  4. advising on investments
  5. operating a multilateral trading facility
  6. safeguarding and administering investments
  7. sending dematerialised instructions
  8. Lloyd’s activities, insurance activties and providing funeral plan contracts
  9. mortgages: provision, administration, advising and arranging
  10. home finance activities
  11. managing dormant account funds
  12. accepting deposits by way of business and issuing electronic money
  13. providing credit reference or credit information services
  14. establishing, operating or winding up collective investment scheme or pension scheme
  15. agreeing to carry on most regulated activities
30
Q

criminal offences for General Prohibition

A
  1. magistrates court
    ( 6 months and/or 5k fine)
  2. crown court
    ( 2 yrs and/or unlimited fine)
31
Q

specified invesmtents

A
  • shares/depositary receipts/ warrants
  • debt instruments
  • units in collective investment schemes
  • options
  • futures
  • contracts for differences
  • lloyd’s syndicates, insurance contracts and funeral plan contracts
  • pensions
  • regulated mortgages and home finance
  • deposits and electronic money
  • rights to specified investments e.g. sale and repurchase agreements (repos)
  • loans and other forms of credit
  • emissions auction products
  • benchmarks
32
Q

excluded investments

A
  • property
  • tangible assets
  • currencies
  • premium bonds
  • national savings certificate
  • commerical loans
33
Q

excluded activities

A
  • newspapers
  • television broadcast
  • providing information
  • unpaid trustees: e.g. nominees, executors
  • employee share schemes
  • dealing as principal and end user ( no service is offered)
34
Q

civil remedies for contravening the general prohibition

A
  • injunctions
  • restitution orders
  • contracts are voidable at the choice of the investor
35
Q

defences for General prohibition

A
  • took all reasonable precautions to avoid committing that offence
  • exercised due diligence to avoid committing that offence.
36
Q

european supervisory authorities

A

ESMA
EBA (European banking authority)
EIOPA (european insurance and occupational pensions authority)

37
Q

ESMA achieves 3 objectives through

A
  • promoting supervisory convergence
  • assessing risks to investors, market and financial stability
  • completing a single rulebook for EU financial markets
  • directly supervising financial entities
38
Q

ESMA main powers

A

level 1 : directives and regulations
level 2 : processes (drafting subordinate acts : delegating acts or implementing acts)
level 3: develop guidelines and recommendations
level 4: launch investigation into a concern and address a relevant national authority on the issue within 2 months

39
Q

Payment systems regulator (PSR) objectives

A
  • ensure payment systems are operated and devo loped in a way that considers and promotes the interest of businesses and consumers using them
  • promote effective competition between operators, PSPs and infrastructure provider
  • promote development of and innovation in payment systems
40
Q

PSR has power to

A
  • set standards and rules and carryout investigations
  • require operators to provide direct access to payment systems
  • mend agreements, fees and charges
  • act alongside CMA to rectify anti-competitive behaviour
41
Q

breaching GDPR the ICO can

ICO financial penalty £500,000
GDPR 4% global turnover or 20mill euro whichever is greater

A
  • enter premises and seize documents without warrant
  • issue enforcement notices requiring data controllers to take remedial action to remedy breaches (breaches to ICO in 72 hrs or without delay)
  • instigate criminal proceedings
42
Q

FSCS overseen by

A

FCA +PRA

43
Q

S138 FSMA 2000

A

grants FCA power to make general rules

44
Q

firm systematic framework

A
  • governance and culture
  • product design
  • sales or transaction processes
  • post-sales/services and transaction handling
  • business model and strategy analysis
  • assesment of fair treatment
  • deciding actions needed
  • communication to the firm
45
Q

RDC

A
  • exercises certain deicision making powers on behalf of FCA/PRA
  • appointed by the FCA board
  • accountable to the fca BOARD
  • Chair of board is employee of fca rest are from finanancial services setors or outside
46
Q

S23 FSMA 2000 criminal offfence to carry out regulated activity without authorisation or exemption

A

FCA prosecutes 2 yrs jail + unlimited fine
can institute civil enforcement proceedings

Investment Environment (10 decks)

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