Regulations: Rules

What is the first data protection principle?

Processing must be lawful and fair

What is the second data protection principle?

Purposes of processing data must be specified, explicit and legitimate

What is the third data protection principle?

Personal data must be adequate, relevant and not excessive

What is the fourth data protection principle?

Personal data must be accurate and kept up to date

What is the fifth data protection principle?

Personal data must be kept for no longer than is necessary

What is the sixth data protection principle?

Personal data must be processed in a secure manner

What is the first CISI Code of Conduct rule?

Personal accountability

What is the second CISI Code of Conduct rule?

Client focus

What is the third CISI Code of Conduct rule?

Conflict of interest

What is the fouth CISI Code of Conduct rule?

Respect for market partners

What is the fifth CISI Code of Conduct rule?

Professional development

What is the sixth CISI Code of Conduct rule?

Aware of capabilities

What is the seventh CISI Code of Conduct rule?

Respect for others and the environment

What is the eighth CISI Code of Conduct rule?

Speak up and listen

What is SM1?

You must take reasonable steps to ensure that the business of the firm for which you are responsible for is controlled effectively

What is SM2?

You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system

What is SM3?

You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

What is SM4?

You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

What is rule 1 of COCON?

You must act with integrity

What is rule 2 of COCON?

You must act with due skill, care and diligence

What is rule 3 of COCON?

You must be open and cooperative with the FCA and PRA.

What is rule 4 of COCON?

You must pay due regard to the interests of customers and treat them fairly

What is rule 5 of COCON?

You must observe proper standards of market conduct

What is rule 6 of COCON?

You must act to deliver good outcomes for retail customers

Which of the COCON rules applies to you if you are outside of the customer duty PRIN 12?

Rule 4:

You must pay due regard to the interests of customers and treat them fairly

Which of the COCON rules applies to you if you are inside of the customer duty PRIN 12?

Rule 6:

You must act to deliver good outcomes for retail customers

What is the purpose of PIDA 1998?

protects the ability for an employee to make protected disclosure

What category of SMCF does whisteblower champion fall under?

SMF

Under the CRD framework, what is the purpose of Pillar 2?

A To set additional capital for risks not covered in Pillar 1

B To set disclosure standards for risks and capital to markets

C To set minimum capital for credit, market and operational risks

D To set conduct standards for firms dealing with retail clients

The correct answer is: A - To set additional capital for risks not covered in Pillar 1

Explanation:

Pillar 2 allows firms and supervisors to decide whether additional capital should be held for risks not covered in Pillar 1. Pillar 1 covers minimum capital requirements and Pillar 3 covers disclosure, while conduct standards are outside the three-pillar prudential framework.

What are the key rules and purpose of EMIR?

EMIR is the regulation of OTC derivatives to encourage greater transparency and better, more effective risk management

Reporting obligations:

All derivative contracts must be reported to a trade repository

Applies to both financial and non-financial counterparties

What is he key effect of SSR?

Short selling regulations:

• Requirement to disclose net short positions

• Could be public or private disclosure depending on the size

What are the key rules and purpose of SFTR?

Securities Financing Transaction Regulation:

(when collateral is used)

• Securities financing transactions must be reported to a trade repository

• Specific disclosure requirements for rehypothecated assets

• Financial counterparties only in the UK

What is the purpose and rules of Companies Act 2006 S793 Letter?

• Requires disclosure of shares to the firm vs. LSE when aquisition

• Disclosed at present time - for the last 3 years

What is the purpose of UK Takeover Code?

Ensures shareholders are treated fairly

What are the 6 principles of UK Takeover Code?

1. All shareholders given equal treatment and protected

2. Shareholders given sufficient time and information to decide

3. Board of target to act in best interests of company as a whole

4. False markets must not be created

5. Predator to make bid only after ensuring they can meet cash requirements of bid

6. Target company not to be hindered in its business affairs for any longer than is necessary

What is the purpose of Data Protection Act (DPA 2018)?

protection of any data that can be used to identify a data subject

What is the geographical scope of the Bribery Act 2010?

Worldwide

What are the 4 offences under the Bribery Act 2010?

1. Paying + offering

2. Receiving + soliciting

3. Bribery of foreign officials (unless local law requires that payment)

4. Failure to prevent bribery (applies only to firms) - unless there was an adequate process to prevent bribery

Which of the Bribery Act 2010 offences applies specifically to firms as a whole and what is the exception?

S7: Failure to prevent bribery

Exception: had adequate process to prevent bribery

Who are the Data Protection Act 2018 principles enforced by?

ICO - Information Commissioners Office

What are the 3 key things that identify inside information?

• Specific

• Not public

• Price Sensitive

Who prosecutes insider dealing?

FCA - under FSMA 2000 - if they have sufficient info and can prove intent

Who monitors insider dealing?

LSE

Which instruments are in scope of the disclosure offence under Insider Dealing?

• Shares / ADRs / Warrants

• Tradable debt

• Options / Futures / CFDs

Which instruments are excluded from the disclosure offence under Insider Dealing?

• Assets without secondary market

• Commodities

• Spot + forward FX

• Insurance products

What are the 3 special defences against insider dealing?

1. Price stabilisation

2. Market Info

3. Market makers acting in good faith

Under what regulation/legislation does insider dealing fall?

S52 Criminal Justice Act 1993

What are the 4 key types of investments under scope of MAR?

1. Any financial instrument trading on a regulated market

2. Emissions allowance

3. Commodity derivatives

4. Commodity spot markets

What are the 6 key market abuse offences under FCA Market Conduct Handbook Guidance?

1. Insider Dealing

2. Improper Disclosure

3. Manipulating transactions e.g. wash trade

4. Manipulating devices e.g. pump and dump

5. Dissemination e.g. leaking info

6. Benchmark manipulation

What 4 key market abuse offences under FCA Market Conduct Handbook Guidance apply to the firm only and fall under MAR?

Manipulating Transactions

Manipulating Devices

Benchmark Manipulation

Dissemination

What are the sanctions under MAR for firms who commit a market abuse offence?

• Withdrawal of regulated status

• Unlimited fines

• Public statements

• Injunctions and/or restitution

What are the 4 key defences against Market Abuse?

• Share buy back

• Takeover code

• FCA rules

• Market sounding (gauging investor demand)

What are the 3 requirements for market sounding to be a defence for market abuse?

1. Disclosures

2. NDAs

3. Record keeping

Generally speaking what is the scope of market abuse? individual or firms?

BOTH firm and individual

What kind of firms does MAR PDMRS apply to?

All PLCs

What types of banks can client assets be held in? (4)

• Central Bank

• BCD Credit Institution

• Bank authorised by 3rd party

• Money Market Fund

What is the CASS Resolution Pack?

The documents required by the liquidator incase of default

What must be included in the order execution policy? (3)

1. List of execution venues

2. Factors that will affect choice of execution venue

3. Warning of client’s instructions

What are the 4 criteria that must be evaluated when determining best execution?

1. Customer category

2. Type of order

3. Type of financial instrument

4. Execution venues

What must be included in the periodic statement? (6)

1. Name firm + client’s account

2. Portfolio composition

3. Fees + charges

4. Performance composition

5. Payments received

6. Corporate actions

What are the 3 key rules that ensure independence of market sensitive investment research?

1. Not an inducement

2. Not promising issuers favourable coverage

3. Issuers cannot review drafts

What are the 3 suitability rules?

1. Meet investment objectives

2. Able to bear financial risks

3. Has necessary knowledge and experience to understand risks

What 3 things need to be included in the suitability report?

1. Client’s demands and needs

2. Why the transaction meets these needs

3. Explanation of possible disadvantages

What are the 2 points in the appropriateness rules?

1. Able to bear financial risks

2. Has necessary knowledge and experience to understand risks

What is the one point that is included in suitability rules but not appropriateness rules?

Meet investment objectives

What products are classified as non-complex products? (3)

1. Shares/Bonds

2. Money Market Instruments

3. Units in CIS

What are the 3 key things to be in the Conflicts Policy?

1. Identification of potential conflicts

2. Must be in writing

3. Procedures to manage conflicts of interest e.g. Chinese walls

What are the 3 rules of the approval of financial promotions?

1. Approved by an authorised firm

2. Promotion only to those intended (focus)

3. Fair, clear & not misleading

What investments does the Key Information Document (KID) cover?

Packaged Retail & Insurance-based Investment Products (PRIIPS)

What investments does the Key Investor Information Document (KIID) cover?

UCITs schemes

What investments does the Key Features Document (KFD) cover?

Any non-PRIIP packaged product

What must be included in the Info & Product Disclosure Document (IDD) to all clients? (6)

1. Name and address of firm

2. Method and language of communication

3. Name and contact details of competent authority

4. Whether the firm is acting through an appointed representative

5. Nature, frequency and timing of performance reports

6. If a common platform firm, the conflicts of interest policy

What are the 5 disciplinary measures available to the FCA through the enforcement process?

1. Withdrawal/variation of authorisation (firms) or approval (individual)

2. Prohibition order (individual) = cannot work in Financial Services

3. Restitution order = compensation

4. Public censure + financial penalties

5. Prosecution to the court

What is a supervisory notice?

It means there is no disciplinary action enforced by the regulator and instead they will get involved to help the firm immediately.

Who usually issues a notice of discontinuance, supervisory or final decision?

Usually RDC but can also be by FCA/PRA

Who is the RDC, who are they accountable to?

Regulatory Decision Comittee

Independent from the FCA

Accountable to the FCA

Funded by the FCA

Who are the RDC funded by?

FCA

What is a notice of discontinuance and when can it be issued?

Issued any stage in the enforcement process

It confirms that the regulator will not continue with the investigation

What are the 3 components of the Fit and Proper test?

1. Honesty, Integrity and Reputation

2. Competence & Exam success

3. Financial Soundness

What does the MPC do?

Monetary Policy Committee - controls inflation

What are the 3 cross-cutting rules?

1. Act in good faith towards retail clients

2. Avoid causing foreseeable harm

3. Enable and support retail clients to pursue their financial objectives

What is the purpose of the CMA? (3)

Competition & Markets Authority (government body)

1. Investigate + block takeovers

2. Enforce customer protection regs

3. Prosecute unlawful cartels

What is the purpose (2) of the ICO and under which 2 legislations are they granted those powers?

1. (Data Protection Act 2018) Ensure Data Privacy

2. (Freedom of Information Act 2000) Promote openness by public bodies

What is the Pension Protection Fund funded by?

Funded by assets on schemes