IMC Unit 1 4

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  1. the UKs main statutory regulator?
  2. when was banking supervision transferred to the FSA?
    the Bank of England Act 1998
  3. despite losing the role of bank supervision in 1998, the bank of england gained the role of?
    setting official UK interest rates, carried out by the banks MPC
  4. open market operations
    bank of england uses quantitative easing
  5. 2 systems the bank of england uses
    wholesale payments system and real-time gross settlements system
  6. lender of last resort
    bank of england
  7. The treasury
    • is UKs economics and finance ministry
    • -aims to raise the rate of sustainable growth, achieve rising prosperity and a better quality of life with economic opportunities for all
  8. who has overall responsibility of the treasury?
    chancellor of the exchequer
  9. DMO
    debt management office of the treasury, issues govt debt
  10. MOU on financial stability
    divides responsibility between the tripartite authorities
  11. tripartite authorities
    • 1. bank of england-contributes to the maintenence of the stability of the financial system on the whole
    • 2. fsa-authorisation and supervision of financial institutions
    • 3. hm treasury-overall institutional structure of regulation and the legislation that governs it
  12. tripartite standing committee
    chancellor of the exchequer, governer of the bank of england and chairman of the fsa
  13. fsa board is appointed by who?
    the treasury, therefore the chancellor of the exchequer is ultimately responsible for the regulatory system for financial services under FSMA 2000
  14. proportionate rational
    treasury judges FSA by burdens imposed on the regulated community are proportionate to the benefits it provides
  15. annual report
    treasury reuires annual report from fsa
  16. changes to the FSA
    in june 2010, it was announced that the FSA in its current form would be abolished, losing much of its role to the consumer protection and markets authority (part of the bank of england)
  17. takeover panel
    • panel on takeovers and mergers, an independent body established in 1968, main objective to administer the city code on takeovers and mergers ensuring fair treatment for shareholders in takeover bids
    • -up to 34 members, including a chairman, up to 2 deputy chairmen, up to 20 members and then other individuals appointed by various industry bodies
  18. takeover directive (interim implementation) regulations 2006
    part of the companies act 2006, takeover panel was given statutory authority
  19. city code
    • city code on takeovers and mergers, city code, the blue book, the takeover code or simply the code
    • -developed since 1968 reflecting collective opinion to appropriate business standards
  20. Executive
    • operates independently of the takeover panel and does the day to day work of takeover supervision and regulation
    • -may be approached for general guidance on interpretation of the code or in relation to specific issues on a no name basis
  21. code committee
    • carries out the rule making functions of the panel
    • -keeping the code under review, proposing, consulting on, making and issueing amendments to the code
  22. hearings committee
    reviews rulings by the executive and hears discplinary proceedings when the chairmen considers there has been a breach of the code
  23. takeover appeals board
    • independent body which hears appeals against rulings made by the hearings committee
    • -the board may confirm, vary, set aside, annul or replac the contested ruling of the hearings committee
  24. How is the takeover panel financed?
    • -1 GBP levy on buyers and sellers of share transactions in certain securities over 10,000 GBP (the PTM levy)
    • -document charges (payable on offer docs)
    • -exemption charges (5,000 GBP per review, payable by groups enjoying exempt status)
  25. PTM levy
    takeover panel levy of 1 GBP on buyers and sellers of share transactions in certain securities over 10,000 GBP
  26. OFT
    • Office of fair trading, goal of making markets work well for consumers
    • -offers advice, support and guidance to businesses on competition issues and on consumer legislation
    • -grants approved status if consumer codes of practice are met
  27. Control of misleading advertising regulations
    the OFT works under these regulations, with bodies such as the Advertising Standards authority in exercising its powers to stop deceptive or misleading advertising
  28. consumer credit market regulation
    regulated by the OFT, it operates a licensing system through which checks are carried out on consumer credit businesses and issues guidelines on how the law will be enforced
  29. OFT and FSA relationship
    • OFT has specific responsibilites under the FSMA 2000, to review activities and rules of the FSA with respect to competition issues
    • -if OFT believes FSA rules will adversely impact competition it must report this to the FSA, the treasury and the CC
    • -CC must report back and treasury decides on any further action
  30. CC
    competition commission ensures regulatory regime is not anti-competetive
  31. 2 roles of CC
    • 1. under s162 FSMA 2000, concerns FSAs rules, guidelines and statements of principal which OFT is responsible for keeping under review
    • 2. under s306 FSMA 2000, the regulatory provisions and practices of RIEs and RCHs, OFT also keeps them under review
    • In both cases OFT must make a report, either siting adverse effects on competition, or may make a report if it considers there is no adverse effect on competition
    • -CC then can issue a report if OFT report is valid, otherwise they can state no need to create a report
    • -if CC reports, it might instruct what action the treasury should take on the FSA
  32. DPA 1998
    Data Protection Act 1998, where presons process personal data, electronically or manually, they must be registered (unless exempt) with the Information COmmissioner (who maintains a public registry of data controllers) and must comply with DPA provisions
  33. Information Comissioner
    maitains public registry of data controllers under DPA 1998
  34. UK competition regulations aim to
    ensure mergers and acquisitions are not going to result in uncompetetive practices or a substantial lessening of competition
  35. two tier competition investigation approach
    OFT and CC, then bid is either blocked or cleared
  36. BIS
    Secretary of State for Business, Innovation and Skills is the one exception to the two tier approach as they intervene in cases of national security
  37. Main statutory rules are within
    the 2002 Enterprise Act
  38. 2 scenarios that qualify for investigation
    • 1. combined enterprise controls at least 25% of the goods or services in the sector in the UK
    • 2. the turnover of the equity being acquired exceeds 70 million GBP
  39. While the panel is swift in making decisions, the cc is not
    • OFT can investigate 4 months from when the transaction went public
    • CC must normally comply with 6 months
  40. Can the CC impose fines?
    Yes, failure to comply with any request for information
  41. Competition Appeals Tribunal
    a seperate judicial body that CC appeals can be made to
  42. The takeover code applies to
    all offers for public companies which have their registered offices in the UK, Channel Islands or Isle of Man
  43. Takeover code applies to private companies only when
    • 1. equity share has been listed on the LSE during the last 10 years
    • 2. dealings or prices have been advertised on a regular basis for at least 6 straight months in the last 10 years
    • 3. companies shares have been dealt on the AIM in the last 10 years
    • 4. company has issued a prospectus to issue equity shares in the last 10 years
  44. Main objective of rules of Takeover code:
    to cover any company where the public may have had an opportunity to purchase shares in the recent past
  45. Where does the city code have statutory effect?
    under the companies act 2006, only in the UK, not in the channel islands or isle of man
  46. Control
    defined as at least 30% of the companies voting rights
  47. When a shareholder , including that of parties acting in concert, exceed 30%, the shareholder must
    make a takeover offer
  48. General principal #1 of 6 of the city code
    All holders of securities of the same class must be afforded equivalent treatment
  49. General Principal #2 of 6 of the city code
    holders of the securities of an offeree ccompany must have sufficient time and information to reach a proper decision
  50. GP #3 of 6 of the city code
    the board of an offeree company must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the bid
  51. GP #4 of 6 of city code
    false markets must not be created, artifical price manipulation
  52. GP#5 of 6 of city code
    an offeror must announce a bid only after ensuring thatr he/she can fulfill in full any cash copnsideration
  53. GP#6 of 6 of city code
    an offeree company must not be hindered for longer than is reasonable by a bid for its securities
  54. Most important rules governing the pre-bid environment relate to
    secrecy of the negotiations
  55. Panel has the power to force potential bidders into the open rather than
    allow a false market to continue
  56. Once a bid has been announced, the bidding company has ______ days in which to post details of the offer
  57. All days throughout the city code are
    calender days
  58. Posting day is day _____ for all references except announcement
    day 0
  59. Once the offer documents have been posted, the defending companies directors has ____ days to give their opinion on the bid
  60. The first day the bid can close is day
  61. the bid can close only if acceptance % is higher than the liist stated in the
    offering document on posting day
  62. Any offer that has been approved will then remain open for
    14 days to allow shareholders chance to sell shares and leave company
  63. Last formal defence documentation may be issued on day
  64. The offeror company may amend its price for the final time on day
    46, from this point on, it is not able to buy shaes in the market place at above this offer price
  65. A bid can remain open until day
  66. if the bid lapses, the offeror company cannot launch another offer for
    12 months
  67. mandatory bid
    if shareholder takes their stake to 30% or more, then they will be required to make a mandatory offer at the highest price at which the offeror has purchased shares in the last 12 months
  68. acceptance level minimum
    usually not less than 50%
  69. If the company achieves an acceptance level higher than 90%, it may be able to
    invoke the compulsary purchase procedures contained in the companies act which will enable it to force any minority shareholders to sell their shares
  70. Secondary legislation
    FSMA 2000 is the primary legislation framework, secondary legislation links into various sections of the act, e.g. regulated activities order and financial promotions order
  71. FSMA 2000 establishes the regim of
    authorisation of firms to carry out regulated activities
  72. Section 19 of FSMA 2000 contains
    general prohibition, meaning no one person can carry out regulkated activities without being authorised or exempt
  73. Maximum penalties for conducting unauthorized regulated activities?
    • Magistrates court: six months imprisonment and/or 5,000 GBP fine
    • Crown court: 2 years imprisonment and/or ulimited fine
  74. a defence
    for a person to show all reasonable precautions were taken and all due diligence to avoid committing the offence
  75. PERG
    Perimeter guidance manual in the FSA handbook gives guidance about which circumstances authorisation is required
  76. Does firm need to be authorized?
    • if carrying on regulated activity and/or is regarding a specified inventment
    • is not an excluded activity and the firm is not exempt
  77. Exempt persons are APRIL
    • Appointed reps
    • Professional people e.g. solicitars, accountants and actuaries
    • RIEs, ROIEs and RCHs
    • Institutions who are exempt e.g. Bank of England
    • Lloyds members
  78. by way of business
    for regulations to apply, regulated activity must be carried on by way of business
  79. Prohibition order
    under S56 FSMA 2000, can prohibit anyone whether approved or not from carrying out specific functions
  80. 5 Excluded activities, DEMOTE
    • Dealing as principal, where the person is not holding themselves out to the market as willing to deal
    • Employee share schemes
    • Media
    • Overseas persons
    • Trustees
    • nominEes and personal reps
  81. tip sheets
    written recommendations if investments will require authorization
  82. PRIN 3
    FSAs Principle for businesses 3 states a firm must take reasonable care to organize and control its affairs reasonably and with adequate risk management systems
  83. SYSC
    Senior Management arrangements, systems and controls, section of FSA handbook encouraging directors and senior managers of authorised firms to be responsble for their firms arrangements and ensure they know their obligations
  84. 4 Purposes of SYSC
    • 1. encourage directors and senior managers to be responsible for arrangements
    • 2. increase certainty of PRIN 3
    • 3. encourage firms to vest responsiblity for effectiveness and responsible organisation in specific directors and senior managers
    • 4. to create a common platform of organisational and systems and controls requirements for firms subjet to the CRD and/or MiFID
  85. firm must have a firm governance arrangement
    • clear organizationsal structure
    • internal control mechnisms
  86. Organizational requirements
    • firm must:
    • business continuity policy
    • accounting policies and procedures
    • monitor and evaluate
    • have an audit committee
  87. Employees agents and other relevant persons
    • have skills knowledge and expertise
    • segregation of duties
    • aware of the procedures
    • internal control mechanisms
  88. Compliance, internal audit and financial crime
    adequate policies and procedures to ensure compliance for firms managers, employees and appointed reps
  89. Whistleblowing
    SYSC sets out guidance which reflects guidance set out in the public interest discolsure act 1998 (PIDA)
  90. PIDA
    Public Interest Discolsure Act 1998, protects whistleblowers, firms cannot exclude employees right to, protects against unfair dismissal
  91. 5 important areas of the Trustee Act 2000
    • 1. Investment Powers
    • 2. Power to delegate
    • 3. A statutory duty to care
    • 4. Trustee remuneration
    • 5. power to insure trust property
  92. Powers to delegate
    trustees can delegate powers of investment, but when asset management services are delegated there must be a policy statement
  93. 2 types of pension schemes
    • 1. defined contribution schemes
    • 2. defined benefit shcemes
  94. The pensions regulator
    the regulatory body for work based pension schemes in the UK
  95. Pension Act 2004
    • protect benefits of members of work based pension schemes
    • promote good admin
    • reduce risk of claims from the PPF
  96. PPF
    • Pensions Protection Fund was introduced by the Pensions Act 2004 to protect employees in the event their company scheme cannot payout
    • -100% to existing pensioners
    • -90% to those who have not yet retired
    • -funded by a levy, greater the deficit of a companies pension fund between the present value of its future liabilities and current fund size, the great amount levied
  97. SIP
    Statement of Investment Principles, members of work based pension schemes must be give specific information regarding investments held, generally each year in the SIP
  98. Myners Report
    institutional invetsment review from 2001, which say firms must set out in their SIP how they are implenting their principles, if not they need to explain publicly
  99. SIP principles that codify the model of best practice
    • 1. effective decision making
    • 2. clear objectives
    • 3. focus on asset allocation
    • 4. expert advice
    • 5. explicit mandates
    • 6. Appropriate benchmarks
    • 7. performance measurement
    • 8. transparency
    • 9. regular reporting
Card Set:
IMC Unit 1 4
2011-11-13 12:26:14
Regulation Financial Services

Regulation of Financial Services
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