UK and International Regulatory Framework Flashcards

What is MiFID II and what are its main objectives?

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

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.

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

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

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.

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

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

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.

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

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

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.

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

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

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.

What is the 'UCITS' framework?

Answer: An EU regulatory framework for collective investment schemes (Undertakings for Collective Investment in Transferable Securities) allowing passporting of retail funds across EU member states

UCITS is an EU regulatory framework that sets standards for retail investment funds — including diversification requirements, eligible assets, liquidity, and investor disclosure. UCITS-compliant funds can be marketed across EU member states using a single authorisation (passport).