CISI IAD UK and International Regulatory Framework 2

Question 1

What is the 'client money' (CASS) regime in the UK?

Accepted Answer

FCA rules requiring regulated firms to segregate client money and assets from the firm's own money, protecting clients if the firm becomes insolvent

Answer

The Client Assets Sourcebook (CASS) requires FCA-regulated firms to keep client money and safe custody assets separately from the firm's own funds. In the event of a firm's insolvency, client money held in segregated accounts is protected and returned to clients, rather than becoming available to the firm's creditors.

Question 2

What is a 'person discharging managerial responsibilities' (PDMR) under MAR?

Accepted Answer

A director, senior executive, or person with regular access to inside information about an issuer and power to make managerial decisions affecting its future development and business prospects

Answer

PDMRs are key individuals in listed companies — typically directors and senior executives — who have access to inside information and whose trades in the company's securities must be disclosed to the market and notified to the FCA within three business days of each transaction.

Question 3

What is the FCA's 'Individual Conduct Rules' (ICR) under SM&CR?

Accepted Answer

A set of standards of conduct applicable to all employees of regulated firms, including requirements to act with integrity, due care and diligence, and to be open with regulators

Answer

The Individual Conduct Rules apply to all staff at regulated firms (with some exceptions). The five basic rules require: acting with integrity, acting with due care skill and diligence, being open and cooperative with regulators, paying due regard to clients, and observing proper market conduct standards.

Question 4

What is 'transaction reporting' under MiFID II / UK MiFID?

Accepted Answer

The obligation on investment firms to report details of all transactions in financial instruments to the FCA (or relevant competent authority) to assist with market surveillance and detecting abuse

Answer

Transaction reporting requires investment firms to submit detailed reports of every transaction they execute in financial instruments to the FCA by the end of the following business day. The FCA uses this data to monitor for market abuse and ensure market integrity.

Question 5

What is the purpose of the 'product governance' regime under MiFID II?

Accepted Answer

To require manufacturers and distributors of investment products to identify a target market for each product and ensure it is only distributed to clients for whom it is suitable

Answer

Product governance rules require manufacturers to define a target market (the type of client the product is designed for) and distributors to ensure products only reach their intended target market. This aims to prevent unsuitable products being sold to inappropriate clients at the point of product design, not just at sale.

CISI Investment Advice Practice Test

CISI Investment Advice Practice Test

CISI IAD UK and International Regulatory Framework 2