IMC 1 6

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  1. The most important aspects of an individual being approved
    • 1. Honest, integrity, and reputation
    • 2. Competance and capability-not a requirement that a person has experience
    • 3. Financial soundness
  2. To apply for approval the firm must first obtain a
    FORM A
  3. Under FSMA 2000, FSA is allowed _____months from the time of the application to come to a decision
    3 months
  4. If an individual performs a controlled function without being authorised then they must send in a
    a notice to withdraw approval on form C within 7 days of the action taking place
  5. When an individual transfers internally, the firm has the duty to send
    FORM E to the FSA
  6. SUP
    Supervision Manual, under section 59 FSMA 2000, individual cannot carry out a controlled activity without prior approval by the FSA
  7. Controlled functions are?
    • Exerting a significant influence on the conduct of the firms affaiors
    • dealing directly with customers
    • dealing with the property of customers
  8. Governing Functions in Supervision Manual
    • 1. Director Function
    • 2. Non-executive director function
    • 3. Chief executive
    • 4. Partner Function
    • 5. Director of an unincporporated association function
    • 6. Small friendly society function
  9. Required functions of supervision manual
    • 8. appotionment and oversight function
    • 9. EEA investment business oversight function
    • 10. Compliance oversight function
    • 11. Money laundering reporting officer function
    • 12. Actuary function
    • 12a. With-profits actuary function
    • 12b. lloyds actuary function
  10. Systems and controls function of supervisory manual
    28. systems and controls function
  11. Significant management function of Supervision manual
    29. Significant management function
  12. Customer functions of Supervision Manual
    30. Customer Function
  13. Any of the functions except customer functions would be considered to exert significant influence on the conduct of the firms affairs
    • Governeing functions
    • Required Functions
    • Systems and Controls functions
    • Significant management functions
  14. Changes made to in July 2009 to Supervision manual
    • 1. extended the scope and application of director function and non-exectutive director to include persons employed by an unregulated parent undertaking or holding company, whose decisions or actions are regularly taken into account by the governing body of a regulated firm
    • 2. Extended the definition of the significant management controlled function to include all proprietary traders who are not senior managers but who are likely to exert significant influence on a firm
  15. TC
    Training and competance
  16. Competanet Employees rules
    • 1. is now main handbook relating to competancy of employees , and supplements FSA supervisory function of the competant employees rule for retail activities
    • 2. firms must employ personel with skills, knowledge and expertise, this rule applys to non-MiFID and MiFID firms
  17. There are appropriate examination requirements for
    • designated investment requirements carried on for retail clients excvept they dont apply to basic advice on non deposit stakeholder products
    • and for regulated mortage activity, home reversion schemes, carried on for customers
  18. Employees must then pass the relevant
    regulatory module
  19. must not allow employees to take regulatory modules without
    appropriate supervision
  20. An employee with three years up to date relevant experience outside the UK may be exempted from
    modules of an appropriate examination, but the regulatory module must still be taken
  21. never exemptions for
    • those advising retail clients on packaged products
    • broker fund advising
    • advising on syndacate participation at lloyds or acting as a pension transfer specialist
  22. TC record keeping
    • 5 years MiFID
    • 3 years non MiFID
    • Indefinitely for a pension transfer specialist
  23. Record retention
    Life policies?
    For financial promotions of the above?
    suitability reports for non-MiFID products other than above?
    Non-MiFID copies of confirmations of statements, for CISs?
    Records of telephone and electronic convos?
    • Indefefinitely for pernsion transfers and optouts
    • 5 yeaars for life policies and pension contracts
    • 6 years for financial promotions
    • 3 years non mifid suitability reports other than above
    • 3 years for CISs
    • 6 months for telephone or elecronic communications
  24. Copies of confirmations dispatched must be kept at least _____ years for MiFID and equivalent third country business and for at least _____ years in other cases
    5 and 3
  25. For a retail client, the periodic statement should be provided every
    6 months
  26. Except a leverage portfolio, it should be provided
    at least monthly
  27. if the client request qrtly?
  28. Must be supplied
  29. periodic statements for contingent liability transactions may include information on
    the collateral value and option account valuations
  30. For non-mifid business, a firm does not need to supply a periodic statement to
    a client habitually resident outside of the UK if the client does not wish to recieve it
  31. and for a CTF
    no, if the annual statement contains the periodic information
  32. Three phases of money laundering?
    • Placement-launderer deposits
    • Layering-passed through complicated series of transactions
    • Integration-be reused for legitimate use
  33. First EU Money Laundering Directive
    • In 1991
    • 1. required all EU states to create criminal offenses
    • (this enacted into UK legislation via Criminal Justice ACT 1993)
    • 2. all EU states should ensure internal procedures and controls for all financial and credit institutions
  34. 3 Aims of internal procedures?
    • 1. Detterance
    • 2. Co-operation
    • 3. Detection
  35. Second EU Money Laundering Dierctive and 3rd
    • in 2001 and then in 2007
    • 3rd directive incorporates into EU law the 40 recommendations of the FATF
  36. FATF
    international Financial Action Task Force gave 40 recommendations
  37. Main changes by the 3rd Anti MOney Laundering Directive
    • 1. the term Occasional transaction (value below 15,000 E) is used instead of one-off
    • 2. risk based approach is mandatory
    • 3. detailed coverage of customer due diligence
    • 4. enhanced DD on a risk-snesitive basis including for PEPs from outside UK
    • 5. relying on other appropriately qualified regulated firms
  38. Supervising Agencies
    auctioneers accepting cash of 15,000 EUR or more must register with HMRC, estate agents must register with OFT and casinos must register with the Gambling commission
  39. MLR 2007
    Money laundering Regulations of 2007 relate to institutional liability generally
  40. Failure to implent what is a criminal offence?
    risk sensitive policies and procedures for anti money laundering
  41. Firms may be sanctioned for not having adequate
    anti money laundering (AML)/ counter terrorism financing (CTF) systems
  42. CTFq
    counter terrorism financing systems
  43. Penalty for failure to comply with ML regulations?
    • max 2 years, a fine or both in the crowns court
    • 6 months and max 5000 fine in magistrates court
  44. The main offenses under UK money laundering legislation?
    • 1. Assistance
    • 2. Failure to report
    • 3. Tipping off
    • 4. Failure to comply
  45. Max penalty for assistance?
    • 14 years and/or unlimited fine in Crowns court
    • 6 months/5000 GBP in magistrates court
  46. Max penalty for failure to report?
    • 5 years/unlimited fine in crowns
    • 6 months/5000 in magistrates
  47. Tipping off penalty?
    • 5 years/unlimited fine in CC
    • 3 months/5000 GBP in MC
  48. SYSC identifying money laundering risk includes these 5 factors
    • 1. its customer, product and activity profiles
    • 2. its distribution channels
    • 3. complexity and volume of transactions
    • 4. processes and systems
    • 5. operating environment
  49. SYSC Rules require 6 things
    • 1. allocation of responsibility for establishment and maintenance of AML systems and controls
    • 2. MLRO at least annually reports
    • 3. appropriate training
    • 4. appropriate documentation
    • 5. measure to ensure money laundering risk day to day
    • 6. identification procedures
  50. Nominated officer
    • in practice will be the MLRO or his deputy
    • -must report tp SOCA
  51. SOCA
    Serious Organised Crime Agency
  52. Compliance function
    • -be staffed by appropriate number of competant staff
    • -unrestricted access to firms relevant records
    • -ulitimate recourse to its governing body
  53. Compliance oversight
    designated business will appoint someone responsible for this
  54. Role of JMLSGG?
    • tp provide guidance notes with risk-based approach when deciding
    • -a person has failed to report ML under POCA 2002
    • -failed to report terrorist financing under Terrorism Act 2000
    • -failed to comply with MLR 2007
  55. JMLSGG
    Joint Money Laundering Steering Group Guidance
  56. Firms Policy statement might include
    • Guiding Principles
    • -culutre and values towards financial crime
    • -ensuring customers identities
    • -KYC
    • -Staff is trained
    • -prompt reporting of suspicions
    • Risk Mitigation approach
    • -summary of AML/CT risk assessment approach
    • -allocation of responsibilites
    • -procedures for identification
    • -procedures for monitoring
  57. CDD
    customer due diligence
  58. firm must apply CDD when
    • -establishes business relationship
    • -occasional transactions of 15K or more
    • -suspects ML or TF
    • -doubts indentification
  59. EDD
    enhanced DD, for higher risk situations such as with PEPs
  60. SDD
    Simplified DD, low risk situtations
  61. PEPs
  62. SDD means
    not having to apply CDD measures
  63. Order of Dcuments offering evidence of ID as seen in the JMLSG guidance notes
    • 1. government departments or a court
    • 2. other public sector bodies
    • 3. regualted financial services firms
    • 4. other firms subject to MLR or equivalent legislation
    • 5. Other organisations
  64. For private companies
    • names of all directors
    • names of benefical owners holding over 25%
  65. Terrorism Act 2000 defines terrorism
    • -involves serious violence against a person or
    • -involves serious damage to property or
    • -endangers a persons life or
    • -creates a serious risk to the healt or safety of the public or
    • -is designed to interfere with an electronic system
  66. Terrorism Act 4 offenses
    • 1. fund raising
    • 2. Use and possession
    • 3. Funding arrangements
    • 4. ML
  67. consolidated list
    list of all targets whom have been sanctioned
  68. Financial sanctions to countries or regimes?
    any firms, not just banks
  69. CTA 2008
    Counter terrorism act 2008 took affect November 26th 2008 adressed further rules
  70. Currenct legislation making insider trading a criminal act is
    Part V of the Criminal Justice Act 1993
  71. If an insider, 3 things that qualify as offenses?
    • 1. to deal in affected securities
    • 2. encourage another
    • 3. disclose the info to another
  72. Price stabilisation rules
    if person can defend that they acted in accordance with these rules, then they are in the clear
  73. Insider deal penalty?
    • max 7 years/unlimited fine in CC
    • max 6 months/5000 GBP fine in MC
  74. Market abuse, under S118 FSMA 2000 is what type of offense?
  75. Requiring under market abuse
    a director of a company, while in possesion of inside information, instructs an employee of that company to deal in qualifying investments or related investments in respect of which the information is inside information
  76. Encouraging under market abuse
    a person recommends or advises a friend to engage in behavior which, if he himself engaged in, it would amunt to market abuse
  77. Market Abuse
    • one person or concert,
    • -qualifying investments admitted to trading on a prescribed market or
    • -qualifying investments in respect of which a request for admission to trading on a prescribed market has been made
    • -related investments of a qualifying investment (strictly, this is only relevant to the offences of 'insider trading' and 'improper discolsure'
  78. qualifying investment
    means any investment traded on a UK RIE or a regulated market
  79. prescribed market
    any UK RIE or regulated market
  80. regulated markets
    comprise the main EEA exchanges
  81. 7 types of market abuse behavior?
    • 1. Insider dealing
    • 2. Improper disclosure
    • 3. Misuse of Information
    • 4.Manipulating transactions
    • 5. Manipulating devices
    • 6. Dissemination
    • 7. Misleading behavior and distortion
  82. The market abuse regime is
    effects based rather than intent based
  83. Code of market conduct
    • 1. descriptions of safe harbors or behaviors which do not amount to market abuse
    • 2. descriptions of behavior that are or are not accepted market practices in relation to one or more identified markets
    • 3.factors that, in the opinion of the FSA, must be taken into account when determining market abuse
  84. FSA penalties for market abuse?
    • 1. unlimited fine
    • 2. Issue a public statement
    • 3. apply to the court to seek an injunction or restitution order
    • 4. withdrawal of authorisation or approval
  85. Safe harbour
    if a person is within one of the indicated safe harbours set out in the code of market conduct by the letter C, they are not committing an offense
  86. Regarding complaints, firms must have
    written procedures to ensure the compaints from eligible counterparties are properly handled
  87. Are firms permitted to outsource complaints handling?
    yes, can arrange a one stop shop for handling complaints with other firms
  88. eligible comlainants
    • a person eligible to have a complaint considered under the financial ombudsman service
    • -a consumer
    • -enterprise with fewer than 10 employees or turnover/annual balance not exceeding 2million EUR (micro enterprise)
    • -a charity with annual income of less than 1m EUR
    • -a trust with less than 1m EUR
  89. For MiFID business, the complaints handling and record rules apply to
    • -retail clients
    • -activities carried on from the branch of a UK firm in another EEA state (not the other way around)
    • -if a firm takes responsibility for activities outsourced to a third party processor
  90. Consumer Awareness of the complaints protection offered
    • -Publish a summary of internal processes for dealing with complains
    • -refer eligible customers in writing to this summary at or immediatley after the point of sale
    • -provide a summary on request or when acknowledging a complain
  91. For non-mifid firms, must ensure that they identify
    any recurring or systematic problems revealed by complaints
  92. for mifid business, complaints must be used to detect and minimise risk of
    comliance failure
  93. Expectation that firms should maintain standards of ethics and professional integrity in their handling of complaints
    having regard to FSA Principle 6 (Customers interests), which requires that firms treat customers fairly, firms should consider acting on their own initiative in respect to customer who have no made complaints
  94. ethical stance
    firms shoudl adopt an ethical stance in following the principles based regulation
  95. For complaints recieved the firm must
    • 1. investigate competently, diligently and impartially
    • 2. assess fairly, consistently and promptly
    • 3. offer any redress or remedial action
    • 4. explains the firms assessment of the complaint to the client, its decision, including any offer
  96. Factors relevant to assessing a complaint
    • 1. all the available evidence and circumstances
    • 2. similarities with other complaints
    • 3. guidance from the FSA, FOS or other regulators
  97. Complaints time limits to dont apply to
    complaints which are resolved the next day
  98. By the end of 8 weeks after recieving the complaint, the firm must
    • send a final response
    • or send a holding response, which explains why a final response cannot be sent
  99. Two stage complaints procedure
    to refer the matter back to the firm or to its head office
  100. Complaints recieved outside of the FOS time limit
    may be rejected
  101. Records for complaints and measures taken for their resolution must be retained for
    • -5 years for mifid business
    • -3 years for other business
  102. Firms must report to the FSA on complaints recieved
    twice a year
  103. FOS
    • Financial Ombudsman services, the compaintant must first go to the firm, but if not resolved then they can go to FOS. An informal method of independent adjucation of disputes between a firm and its customer, cheaper than going through the courts
    • -board is appointed by the FSA, but the FOS is still independent although it is accountable to the FSA and must make annual reports to the FSA
  104. Compulsory jurisdiction
    FOS can consider a complaint against an authorised firm for an act of ommission in carrying out any of the firms regulated activities together with any ancillary activities the firm does
  105. Voluntary jurisdiction
    firms or businesses can choose to submit voluntary jurisdiction of the FOS by entering into a contract with the FOS
  106. Only eleigable complainants who have been customers of authorised firms or of firms which have volumtarily agreed to abide by the FOS rules
    may use the FOS
  107. FOS time limits to taking complaints to FOS
    • -when six months passed since firm sent the consumer the final response (which has to mention the 6 month time limit)
    • -when more than 6 years have passed since the event complained about
    • -more than 3 years since the persons was aware of the event
  108. The OFS determination may include the 4
    • 1. money reward against the respondant
    • 2. an interest reqward a t r
    • 3. a costs award a t r
    • 4. a direction to t r
    • -take just and appropriate steps and may up to 100,000 GBP plus reasonable costs athough rewards of cost are uncommon
    • -if more than 100K would be fair, OFT can advise them to pay balance but cannot force them to do so
  109. interest reward
    may provide for interest from a specified date to be added to the money reward
  110. If the complainant accepts the decision
    the authorised firm is bound
  111. if the complainant rejects the decision
    they can pursue the matter further through the courts
  112. FSCS
    Financial Services Compensation Scheme is set up under FSMA 2000 to compensate relevant claimants where a relevant firm is unable to pay (bankrupt or insolvent
  113. How is the FSCS funded?
    by levies on authorised firms
  114. to be an eligible claimant
    • -a large company or lage partnership/association
    • -authorized firm
    • -an overseas financial services institution, supranatural body, government and local authority
  115. To be entitled to compensation from FSCS
    • 1. eligable claimant
    • 2. have a protected claim, authorised business
    • 3. be claiming against a relevant person who is in default
    • 4. make the claim within the relevant time frame
  116. relevant person
    authorised firm, except EEA firm passporting int the UK (must seek compensation from firms home state), unless the firm has top-up cover provided by the FSCS in addition to, or in the absence of, compensation provided by the home state
  117. top-up cover
    if relevant person is passported firm and has coverage from FSCS, to cover what the homestate doesnt
  118. Consumer awareness of the FSCS promoted a new rule in 2010
    firm must provide information on the existence of the FSCS and level of protection it offers to depositors, and providing any additional trading names under which the firm operates
  119. Compensation limits from FSCS for
    protected investments and home finance?
    Protected deposits?
    Long term insurance policies (for both UK and EEA risks)?
    General insurance?
    • protected investments and home finance-50K GBP (100% of first 50K)
    • Protected deposits-50K EUR OR GBP which ever is greater (100% of first 50K)
    • Long term insurance policies (for both UK and EEA risks)-90% of the claim
    • General insurance-100% of compulsary insurance, in other cases, 90% of the claim
  120. DGSD
    Deposit Guarantee Schemes Directive will require payout in 20 days, with compensation limit of 100K EUR
Card Set:
IMC 1 6
2011-11-16 18:59:50
Regulatory Framework

The Regulatory Framework
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