Certificate in Corporate Finance - Unit 1 Corporate Finance Regulation

Vocabulary practice flashcards generated from Certificate in Corporate Finance Unit 1 Passcards, covering key definitions across UK regulation, COBS, governance, takeovers, and equity markets.

Financial Services and Markets Act 2000

UK legislation that created a system of statutory legislation under a single statutory body, the Financial Services Authority (FSA).

Financial Conduct Authority (FCA)

The UK regulator that came into force in April 2013, responsible for consumer protection, market conduct, and business conduct regulation.

Prudential Regulation Authority (PRA)

The UK prudential regulator responsible for the safe operation of deposit-taking firms, insurers, and investment banks.

Financial Policy Committee (FPC)

A committee within the Bank of England responsible for macro-prudential oversight and protecting UK financial stability.

Dual Regulated

Refers to firms such as banks, insurers, and investment firms that are regulated by the PRA for prudential matters and the FCA for conduct matters.

Recognised Investment Exchanges (RIEs)

UK-based investment exchanges recognized under UK regulation, including the London Stock Exchange (LSE), ICE Futures Europe, London Metal Exchange (LME), Aquis Stock Exchange, and CBOE Europe.

Designated Investment Exchanges (DIEs)

Overseas-based investment exchanges that do not offer access to UK-based customers and as such do not require FCA authorisation.

Recognised Overseas Investment Exchanges (ROIEs)

Overseas-based investment exchanges that offer access to UK-based customers and require FCA authorisation, such as Deutsche Bourse and Chicago Board of Trade.

Public Limited Company (plc)

A registered public company whose Memorandum states it is a plc, requiring a minimum issued share capital of $£50,000$ with all share premium and $25\%$ of nominal value paid up.

Memorandum of Association

A document stating that shareholders wish to form a company, agree to become members, and accept at least one share.

Articles of Association

A document defining the internal rules of a company, including members' rights, share issuance, and appointment of directors.

Ordinary Resolution

A company resolution requiring a simple majority ($>50\%$) of votes to pass.

Special Resolution

A company resolution covering unusual matters (such as altering the company constitution) requiring a $75\%$ voting majority to pass.

Financial Assistance

Direct or indirect help given by a company to buy its own shares, such as a gift, guarantee, indemnity, waiver, or any action materially reducing net assets.

Pre-emption Rights

Rights requiring a UK company issuing new shares for cash to offer them first on a pro-rata basis to existing shareholders, allowing at least $14\text{ days}$ for a decision.

Scheme of Arrangement

A court-approved procedure allowing a company to restructure, merge, or acquire shares if approved by $75\%$ of votes in members' and creditors' meetings.

Unfair Prejudice

A legal protection allowing shareholders or the Secretary of State to petition a court if company members are being treated unfairly.

Markets in Financial Instruments Directive (MiFID)

European framework allowing investment firms to passport authorised core investment services across EEA member states without separate local authorisations.

General Prohibition

The FSMA requirement stating that no person can carry out a regulated activity in the UK unless they are authorised or exempt.

Consumer Duty

FCA requirement under Principle 12 setting higher standards of consumer protection by requiring firms to act to deliver good outcomes for retail customers.

Senior Managers Regime (SMR)

An accountability regime focusing responsibility on senior roles including Chairmen, Executive Directors, and Non-Executive Directors.

Certification Regime

Regulatory mechanism requiring firms to annually assess the fitness and propriety of employees whose roles pose significant potential risk to customers.

Financial Promotion

An invitation or inducement to engage in investment activity.

Per Se Professional Client

Categorisation covering regulated entities, large undertakings meeting specific financial thresholds, central banks, and institutional investors.

Elective Professional Client

A retail client that has opted up to professional client status after passing qualitative and quantitative criteria and signing standard risk disclosures.

Eligible Counterparty

The highest category of client classification, covering entities like investment firms, credit institutions, and national governments for simplified transactions.

Chinese Walls

Administrative and physical barriers erected within a firm to isolate sensitive information and prevent market abuse or conflicts of interest.

Personal Account Dealing (PAD)

Trading conducted by relevant employees for their personal accounts, regulated to ensure alignment with client interests and market abuse laws.

Suitability Report

A formal document provided to retail clients explaining why a specific personal recommendation regarding investments like pensions or life policies is suitable.

Best Execution

The requirement for firms to take all sufficient steps to obtain the best possible trading result for their clients when executing orders.

Money Laundering

The process of disguising the origin of illegally obtained funds to make them appear legitimate through Placement, Layering, and Integration.

Money Laundering Reporting Officer (MLRO)

An individual appointed by an authorised firm to oversee compliance with FCA anti-money laundering regulations.

Nominated Officer

A designated officer who receives internal reports of suspicious financial activity and discloses them to the National Crime Agency (NCA).

Insider Dealing

A criminal offence under Part IV of the Criminal Justice Act 1993 involving dealing, encouraging dealing, or disclosing inside information.

Inside Information

Unpublished, price-sensitive information that is specific or precise relating to particular securities or issuers.

Market Abuse

A civil offence under FSMA covering behaviors like insider dealing, unlawful disclosure, market manipulation, and misleading dissemination on prescribed markets.

Corporate Governance

The framework and system by which companies are directed and controlled.

UK Stewardship Code

A voluntary code establishing stewardship principles for institutional investors to enhance long-term corporate governance quality.

Mandatory Offer

A takeover rule requiring an offeror obtaining a $30\%$ to $50\%$ stake in a target company to make a cash or cash-alternative offer to all shareholders at the highest price paid in the past $12\text{ months}$.

Concert Parties

Persons or entities cooperating under an agreement to obtain or consolidate control of a target company, whose holdings are aggregated under Takeover Code rules.

Primary Market

The capital market where new securities are issued and sold directly to investors for the first time.

Secondary Market

The financial market where previously issued securities are traded among investors, offering market liquidity.

Disclosure Guidance and Transparency Rules (DTRs)

FCA rules implementing market regulations on inside information disclosure, major shareholding notifications, and financial reporting.

Sponsor

An FCA-approved corporate finance firm required by companies seeking a premium listing to advise on listing obligations and rule compliance.

Alternative Investment Market (AIM)

The London Stock Exchange's international market for smaller growing companies operating under a flexible, light-touch regulatory framework.

Nominated Adviser (Nomad)

An adviser required by an AIM company to guide its directors on ongoing regulatory duties and ensure market appropriateness.