Regulation of Financial Markets and Institutions
solved questions
Which is the most significant of the FCA's operational objective? Correct
Answer.--Offering protection to consumers, which the FCA tries to
achieve by the regulation of both individual financial professionals and
firms
Harmonisation of financial services in Europe Correct Answer.--The
FSAP promotes Europe's wider economy by removing barriers and
increasing competitors
-EU's programme consists primarily of directives issued under article 58
of the European Treaty.
-Directives can be implemented by primary legislation or by the more
recent tendency of delegates legislation under section 2(2) of the
European Community Act 1972
-problems can arise when a directive has not been implemented by the
due date or if the implemented legislation does not properly comply with
the directive. In these cases the European Court can make the directives
have a 'vertical direct effect' meaning that between an EU Member State
and a company or individual, the provisions od the directive must be
given precedence over national law
-However, this does not apply between 2 companies and or two
individuals (horizontal direct effect)
-Regualtions are the most direct form of EU law - as soon as they are
passed they have binding legal force through every EU member state, on
a par with national law. Different from directives which are addressed to
national authorities that then take action to make them part of the
national law
,-Regulations are passed either jointly by the EU Council and European
Parliament or by the commission alone
-
Financial Services Action Plan (FSAP) launched in 1999 and has 3
specific objectives Correct Answer.--to create a single EU wholesale
market
-to achieve open and secure retail markets
-to create state of the art prudential rules and structures of supervision
The 2008 financial crisis highlighted supervisory failings Correct
Answer.--the accumulation of excessive risk was mot detected
-surveillance and supervision were not effective in time
-the coordination between national authorities was far from optimal
when transnational financial institutions faced problems
Three supervisory authorities created Correct Answer.--European
Securities and Markets Authority (ESMA)
-European Banking Authority (EBA)
-European Insurance and Occupational Pensions Authority (EIOPA)
ESMA Aim and its main powers Correct Answer.--Aims to ensure the the
integrity, transparency, efficiency and orderly functioning of securities
market in Europe, as well enhancing investor protection
,Powers:
-ability to deaft technical standards that are legally binding in EU
Member States
-ability to launch a fast track procedure to ensure the consistent
application of EU law
-to resolve disagreements between national authorities
-additional responsibilities for consumer protection (including the ability
to prohibit financial products that threaten financial stability or the
orderly functioning of financial markets for a period of 3 months)
-emergency powers
-participating in Colleges of Supervisors and onsite inspections
-Monitoring systemic risk of cross-border financial institutions
-ability to enter into administrative arrangements with supervisory
authorities, international organisations and the administrations of third
countries
Levels of Supervisory system in EU Correct Answer.--ESMA generally
sets standards at high-level, while day-to-day supervision is carried out
by national supervisory authorities
-LEVEL 1 - directives and regulations set the high-level political
objectives on the area concerned. ESMA may be asked for technical
advice by the European Commission
-LEVEL 2 - ESMA has greater role here, drafting 'subordinate acts'
(known as delegated acts and implementing acts). Delegated acts are
concerned more with substantive content of the legislative requirement
e.g. setting out what authorisation info firms need to supply to
, competent authorities. Implementing acts are similar to executive
measures.
-LEVEL 3 - ESMA develops guidelines and recommendations with a
view to establishing consistent, effective and efficient supervisory
practice3s within the European System of Financial Supervision and
ensure consistent application of the EU law. The guidelines and
recommendations are not legally binding but have been strengthened
under ESMA and competent authorities must make every effort to
comply and must explain if they don't intend to comply.
-LEVEL 4 - A fast-track procedure has been introduced by the
regulation establishing the ESMA. At request of a national competent
authority, the European Parliament, Council, Commission or the
Stakeholder Group, ESMA can be requested to launch an enquiry and
can issue recommendations addressed to national authority within two
months of launching the investigation. ESMA can also launch own
investigation
Markets in Financial Instruments Directive (MiFID) Correct Answer.--an
EU law that establishes uniform regulation for investment managers in
the European Economic Area
-Gives firms the right to trade financial services cross-border on the
basis of a single authorisation 'passport' from their home regualtor
-Investment Services Directive (ISD) created a 'single passport' under
which an authorised firm incorporated in one EU Member State can
engage in investment services throughout the European Economic Area
(EEA) without separate authorisation by other EU Member States ('host
states'). The passport only allows a firm to provide the investment
services that have been authorised by home Member State
solved questions
Which is the most significant of the FCA's operational objective? Correct
Answer.--Offering protection to consumers, which the FCA tries to
achieve by the regulation of both individual financial professionals and
firms
Harmonisation of financial services in Europe Correct Answer.--The
FSAP promotes Europe's wider economy by removing barriers and
increasing competitors
-EU's programme consists primarily of directives issued under article 58
of the European Treaty.
-Directives can be implemented by primary legislation or by the more
recent tendency of delegates legislation under section 2(2) of the
European Community Act 1972
-problems can arise when a directive has not been implemented by the
due date or if the implemented legislation does not properly comply with
the directive. In these cases the European Court can make the directives
have a 'vertical direct effect' meaning that between an EU Member State
and a company or individual, the provisions od the directive must be
given precedence over national law
-However, this does not apply between 2 companies and or two
individuals (horizontal direct effect)
-Regualtions are the most direct form of EU law - as soon as they are
passed they have binding legal force through every EU member state, on
a par with national law. Different from directives which are addressed to
national authorities that then take action to make them part of the
national law
,-Regulations are passed either jointly by the EU Council and European
Parliament or by the commission alone
-
Financial Services Action Plan (FSAP) launched in 1999 and has 3
specific objectives Correct Answer.--to create a single EU wholesale
market
-to achieve open and secure retail markets
-to create state of the art prudential rules and structures of supervision
The 2008 financial crisis highlighted supervisory failings Correct
Answer.--the accumulation of excessive risk was mot detected
-surveillance and supervision were not effective in time
-the coordination between national authorities was far from optimal
when transnational financial institutions faced problems
Three supervisory authorities created Correct Answer.--European
Securities and Markets Authority (ESMA)
-European Banking Authority (EBA)
-European Insurance and Occupational Pensions Authority (EIOPA)
ESMA Aim and its main powers Correct Answer.--Aims to ensure the the
integrity, transparency, efficiency and orderly functioning of securities
market in Europe, as well enhancing investor protection
,Powers:
-ability to deaft technical standards that are legally binding in EU
Member States
-ability to launch a fast track procedure to ensure the consistent
application of EU law
-to resolve disagreements between national authorities
-additional responsibilities for consumer protection (including the ability
to prohibit financial products that threaten financial stability or the
orderly functioning of financial markets for a period of 3 months)
-emergency powers
-participating in Colleges of Supervisors and onsite inspections
-Monitoring systemic risk of cross-border financial institutions
-ability to enter into administrative arrangements with supervisory
authorities, international organisations and the administrations of third
countries
Levels of Supervisory system in EU Correct Answer.--ESMA generally
sets standards at high-level, while day-to-day supervision is carried out
by national supervisory authorities
-LEVEL 1 - directives and regulations set the high-level political
objectives on the area concerned. ESMA may be asked for technical
advice by the European Commission
-LEVEL 2 - ESMA has greater role here, drafting 'subordinate acts'
(known as delegated acts and implementing acts). Delegated acts are
concerned more with substantive content of the legislative requirement
e.g. setting out what authorisation info firms need to supply to
, competent authorities. Implementing acts are similar to executive
measures.
-LEVEL 3 - ESMA develops guidelines and recommendations with a
view to establishing consistent, effective and efficient supervisory
practice3s within the European System of Financial Supervision and
ensure consistent application of the EU law. The guidelines and
recommendations are not legally binding but have been strengthened
under ESMA and competent authorities must make every effort to
comply and must explain if they don't intend to comply.
-LEVEL 4 - A fast-track procedure has been introduced by the
regulation establishing the ESMA. At request of a national competent
authority, the European Parliament, Council, Commission or the
Stakeholder Group, ESMA can be requested to launch an enquiry and
can issue recommendations addressed to national authority within two
months of launching the investigation. ESMA can also launch own
investigation
Markets in Financial Instruments Directive (MiFID) Correct Answer.--an
EU law that establishes uniform regulation for investment managers in
the European Economic Area
-Gives firms the right to trade financial services cross-border on the
basis of a single authorisation 'passport' from their home regualtor
-Investment Services Directive (ISD) created a 'single passport' under
which an authorised firm incorporated in one EU Member State can
engage in investment services throughout the European Economic Area
(EEA) without separate authorisation by other EU Member States ('host
states'). The passport only allows a firm to provide the investment
services that have been authorised by home Member State
