CISI IAD UK and International Regulatory Framework

Question 1

What is MiFID II and what are its main objectives?

Accepted Answer

The EU Markets in Financial Instruments Directive II, a comprehensive regulatory framework governing investment services across EU/EEA member states, aiming to improve transparency, investor protection, and market integrity

Answer

MiFID II (effective January 2018) is the EU's regulatory framework for investment services. Its key objectives are to increase market transparency (pre- and post-trade reporting), improve investor protection (suitability, appropriateness, cost disclosure), reduce conflicts of interest, and promote fair, efficient markets.

Question 2

How has Brexit affected the application of MiFID II to UK firms?

Accepted Answer

The UK retained MiFID II requirements in UK domestic law, referred to as 'onshored MiFID II' or UK MiFID, which continues to apply to UK-authorised investment firms

Answer

Following Brexit, the EU's MiFID II was incorporated into UK domestic law. UK firms are now subject to 'onshored' UK MiFID requirements (now being reviewed under the FCA's investment management reforms), which are substantively similar to the EU version but evolving.

Question 3

What is the EU's AIFMD (Alternative Investment Fund Managers Directive) designed to regulate?

Accepted Answer

The management of alternative investment funds (hedge funds, private equity, real estate funds) by alternative investment fund managers operating in or marketing into the EU

Answer

The AIFMD regulates the managers of alternative investment funds (AIFs) — including hedge funds, private equity, real estate, and other non-UCITS funds — operating in or marketing to EU investors. It covers authorisation, capital requirements, leverage limits, and investor disclosure.

Question 4

What is the FCA's 'Senior Managers and Certification Regime' (SM&CR) designed to achieve?

Accepted Answer

To improve individual accountability in financial services by requiring firms to identify senior managers responsible for key functions, certify the fitness of certain staff annually, and apply conduct rules to all employees

Answer

SM&CR aims to make individuals — not just firms — accountable for their decisions. Senior managers must be approved by the FCA, with their responsibilities mapped out in a Statement of Responsibilities. Certified staff must be assessed as fit and proper annually. Conduct rules apply broadly.

Question 5

What is the purpose of the EU's Markets Abuse Regulation (MAR)?

Accepted Answer

To prohibit insider trading and market manipulation, maintaining the integrity of EU financial markets by criminalising the misuse of inside information

Answer

MAR (effective 2016) prohibits insider dealing (trading on inside information), market manipulation (creating artificial prices or volumes), and the improper disclosure of inside information. It applies to all financial instruments admitted to EU trading venues and their related OTC derivatives.

CISI Investment Advice Practice Test

CISI Investment Advice Practice Test

CISI IAD UK and International Regulatory Framework