Market Conduct and Compliance Flashcards

What constitutes insider trading under SCA regulations?

Answer: Trading securities based on material non-public information obtained through a privileged position, or tipping others to trade on such information

SCA regulations define insider trading as buying or selling securities based on material non-public information, or communicating such information to others for trading purposes, both carrying severe penalties.

What is market manipulation as defined by the SCA?

Answer: Artificial interference with the free formation of prices through false or misleading practices such as wash trading, spoofing, or disseminating false information

Market manipulation includes creating misleading market activity through wash trades (trading with yourself), spoofing (placing and canceling orders), disseminating false information, and any scheme to artificially influence security prices.

What disclosure requirements does the SCA impose on major shareholders?

Answer: Major shareholders must disclose when their holdings cross specified thresholds (typically 5%), report changes in holdings, and disclose any trading by board members

SCA requires disclosure when shareholdings cross specified thresholds (typically 5% and subsequent increments), timely reporting of changes in holdings, and mandatory disclosure of all trading by directors and senior management.

What AML/CFT obligations does the SCA impose on securities market participants?

Answer: Customer due diligence, ongoing monitoring, suspicious transaction reporting to FIU, record keeping, and compliance officer appointment

SCA-regulated firms must implement comprehensive AML/CFT programs: customer due diligence and KYC, ongoing transaction monitoring, suspicious activity reporting to the FIU, record retention, staff training, and MLRO appointment.

What conduct of business rules does the SCA establish for licensed firms?

Answer: Fair dealing, best execution obligation, suitability assessments, conflict of interest management, client communication standards, and complaints handling procedures

SCA conduct rules require: fair dealing with all clients, best execution when handling orders, product suitability assessment, managing and disclosing conflicts of interest, clear client communication, and formal complaints procedures.

What whistleblower protections does the SCA provide?

Answer: Protection from retaliation for persons who report securities violations in good faith, with confidential reporting channels and potential financial rewards

The SCA provides whistleblower protection for individuals who report securities violations in good faith, offering confidentiality protections, shields from retaliation, and potentially financial incentives for information leading to enforcement actions.