Regulation and ethics chp 8

Play an AI-generated podcast conversation about this lesson

What is the primary aim of regulation in the financial services sector?

To protect investors and the general public (correct)

To eliminate financial markets altogether

To restrict market participants from engaging in financial transactions

To promote unfair advantages for investors

Which term best describes a mechanism where market participants set rules for agreed standards of behavior and dispute settlement?

Monopolization

Centralization

Self-regulation (correct)

Globalization

Why did the need for regulation develop into self-regulation in financial markets?

To ensure agreed standards of behavior and facilitate dispute resolution (correct)

To create confusion among market participants

To undermine established rules and codes of conduct

To discourage market participation

What was a key factor that led to the need for improved and common standards in global financial markets?

Globalization of financial markets Signup and view all the answers

How did stock exchanges contribute to the development of self-regulation?

By providing a secondary market for shares and setting rules for members Signup and view all the answers

In the context of financial markets, what does 'robust enforcement' of regulations imply?

Thorough and effective application of rules Signup and view all the answers

What is a key aim of financial services regulators globally?

Reduce systemic risks in the industry Signup and view all the answers

Which organization coordinates the introduction of pan-European regulation in the financial services sector?

European Securities and Markets Authority (ESMA) Signup and view all the answers

What is a common principle emphasized by financial regulators globally?

Maintain fairness and transparency Signup and view all the answers

Which country's regulatory practices have been influential in the Middle East?

UK Signup and view all the answers

Which objective is NOT typically given to regulators by governments?

Maximize profits for financial institutions Signup and view all the answers

What role do professional bodies like the Chartered Institute for Securities & Investment (CISI) play in setting acceptable standards of behavior?

Set standards for businesses and individuals Signup and view all the answers

What is a key activity conducted by the US Securities and Exchange Commission (SEC)?

Supervision of securities and futures markets Signup and view all the answers

What is a common goal shared by regulators globally to protect investors?

Facilitate access to necessary investment information Signup and view all the answers

What is a primary aim of maintaining an effective regulatory environment by regulators?

Enhance financial stability and reduce systemic risk Signup and view all the answers

What is the role played by regulators like ESMA in ensuring cross-border provision of financial services in Europe?

Encourage standardization or harmonization of regulations Signup and view all the answers

What is the purpose of money laundering?

Investing criminal proceeds in financial products Signup and view all the answers

Which stage of money laundering involves making it difficult for authorities to trace the funds' origin?

Layering Signup and view all the answers

What is the main focus of Anti-Money Laundering (AML) provisions?

Identifying suspicious activity and reporting it Signup and view all the answers

In the context of terrorist financing, what makes tracking funds more challenging compared to traditional money laundering?

The relatively small sums required Signup and view all the answers

Which international body issued recommendations for different countries to maintain consistent Anti-Money Laundering (AML) efforts?

Financial Action Task Force (FATF) Signup and view all the answers

What is the purpose of the integration stage in money laundering?

Making funds appear legitimate Signup and view all the answers

What is a common method used in the layering stage of money laundering?

Buying and selling foreign currencies Signup and view all the answers

How do firms help prevent money laundering according to the text?

Following due diligence procedures and reporting suspicions Signup and view all the answers

Which activity does NOT fall under the forms of money laundering mentioned in the text?

Participating in legal business ventures Signup and view all the answers

What distinguishes terrorist financing from traditional money laundering?

Legitimate funds can be used for terrorist activities Signup and view all the answers

What term is used to describe the use of a stolen identity to obtain goods or services by deception?

Identity theft Signup and view all the answers

Which type of fraud involves criminals accepting payment for goods but never delivering them to the customer?

Non-delivery fraud Signup and view all the answers

What is a common goal of romance scams?

Obtaining money Signup and view all the answers

Which type of crime involves sophisticated attacks against computer hardware and software?

Advanced cybercrime Signup and view all the answers

What is a characteristic of cyber-enabled crime?

Mainly committed by individuals or small groups Signup and view all the answers

What do criminals employ in order to manage funds and transfer them between jurisdictions, leading to similarities with money laundering?

Modern techniques Signup and view all the answers

What is a key element used by organisations as part of their checks to detect and prevent identity fraud?

'Breeder' documents Signup and view all the answers

Which area of financial crime involves criminals using data from legitimate persons to provide seemingly genuine information for applications?

'Breeder' documents usage Signup and view all the answers

What is a common feature of identity theft?

'Misappropriation' of identity details Signup and view all the answers

What constitutes insider trading?

Acquiring or disposing of securities with unpublished price-sensitive information Signup and view all the answers

Why is it important to define who is an insider in cases of insider trading?

To clarify who has access to inside information that can impact securities prices Signup and view all the answers

What is considered inside information regarding securities?

Information that is specific, precise, and not yet made public Signup and view all the answers

How does insider trading differ from normal trading?

Normal trading relies on publicly available information Signup and view all the answers

In what circumstances can market abuse occur?

When financial investors are unreasonably disadvantaged by unlawful behavior Signup and view all the answers

What types of securities are typically covered under insider trading rules?

Shares, bonds, warrants, depositary receipts, options, futures, and contracts for difference Signup and view all the answers

What is an example of insider dealing?

Purchasing shares with unpublished price-sensitive information Signup and view all the answers

What happens if an insider sells shares based on inside information?

The insider will face fines and potential jail time Signup and view all the answers

Why is it crucial to identify inside sources of information in insider trading cases?

To prevent the misuse of confidential information for personal gain Signup and view all the answers

What constitutes insider dealing?

Using inside information to recommend purchasing financial instruments Signup and view all the answers

When must issuers disclose inside information according to public disclosure requirements?

As soon as possible after obtaining the information Signup and view all the answers

What are directors and senior executives required to do regarding insider lists?

Prepare and maintain insider lists of those with access to inside information Signup and view all the answers

Which is an activity that constitutes market manipulation?

Creating false signals about the price of securities Signup and view all the answers

What behavior is considered market manipulation?

Circulating rumors knowing they are false to influence prices Signup and view all the answers

Who should notify the issuer and regulator of account transactions related to the issuer’s financial instruments?

Directors, senior executives, and closely associated persons with regular access to inside information Signup and view all the answers

What is the purpose of IOSCO according to the text?

To design objectives and standards to be used as global benchmarks for securities markets Signup and view all the answers

What is one of the common themes across different approaches to securities regulation mentioned in the text?

The need for some form of authorization for firms operating in the industry Signup and view all the answers

How does financial regulation aim to protect consumers according to the text?

By reducing the risk of market failures and protecting consumers from financial crime Signup and view all the answers

What is a key consideration for regulatory bodies during the authorisation process mentioned in the text?

The firm's intended activities and senior management's qualifications Signup and view all the answers

Why do financial regulators assess if a firm is 'fit and proper' before granting authorization?

To determine if the firm meets threshold conditions and is capable of providing financial services Signup and view all the answers

Which aspect is NOT mentioned as a benefit of financial regulation in the text?

Encouraging complete deregulation of financial markets Signup and view all the answers

What happens if there is a loss of confidence and trust in financial markets according to the text?

It may result in financial companies' failure and negatively impact the economy Signup and view all the answers

What is a critical role of regulatory bodies in managing market participants according to the text?

Setting minimum standards for market participants during their initial authorisation and ongoing operation Signup and view all the answers

What is one of the essential purposes of authorisation in financial regulation according to the text?

Determining if a firm is fit and proper before providing financial services Signup and view all the answers

Which statement best describes one of the objectives of IOSCO as outlined in the text?

Designing objectives and standards that become international benchmarks for securities markets Signup and view all the answers

What is the relationship between ethics and regulation in the financial services industry?

Ethics is an independent and important topic that should be distinguished from regulation. Signup and view all the answers

Why is it not sufficient to rely solely on formal policies and procedures for maintaining ethical standards?

Conformity with accepted ethical standards cannot be guaranteed through formal documentation alone. Signup and view all the answers

What does it mean to 'instil the type of thinking' as mentioned in the text?

Developing a habit of considering the ethical implications of actions before carrying them out. Signup and view all the answers

In what situations, as per the text, might individuals be faced with decisions where the ethical choice is not immediately clear?

Especially at work, where the right course of action may not be obvious initially. Signup and view all the answers

Why is it important for individuals to develop a sense of ethical awareness in professional practice?

To ensure that high ethical standards are maintained consistently. Signup and view all the answers

How does the text suggest that ethical behavior can be integrated into daily decision-making processes?

By promoting a habit of reflecting on potential actions' ethical aspects before executing them. Signup and view all the answers

What is one of the key principles emphasized in the text with regard to professional behavior towards clients and market participants?

Declining to act when not competent or qualified Signup and view all the answers

What is a key aspect of how professionals should treat others and the environment in their line of work?

Supporting opportunity for all and embracing diversity Signup and view all the answers

What is a core expectation regarding continuous professional development (CPD) as outlined in the text?

Striving for professional excellence through CPD Signup and view all the answers

When assessing mandates from customers and counterparties, what should professionals take into account according to the text?

Following individual mandates without question Signup and view all the answers

What is a key responsibility highlighted in the text related to respecting others and the environment?

Treating everyone fairly and with respect Signup and view all the answers

What is a key requirement for any industry where trust is a central feature?

Demonstrable standards of practice Signup and view all the answers

What is a primary obligation imposed on members of the financial services industry by the Chartered Institute for Securities & Investment (CISI) Principles?

Acting in an open and transparent manner Signup and view all the answers

What behavior does the CISI's Principles expect its members to display towards their clients?

Acting with integrity and honesty Signup and view all the answers

What does the principle of 'Personal Accountability' require of professionals in the securities and investment industry?

Acting with integrity at all times Signup and view all the answers

In the context of the financial services sector, what does 'Client Focus' primarily emphasize?

Putting the interests of clients first Signup and view all the answers

Which of the following is a key expectation placed on members of the financial services industry by the CISI's Principles?

Respecting market integrity and confidentiality Signup and view all the answers

What is a significant aspect emphasized by the CISI's Principles in relation to conflicts of interest?

Challenging and reporting unlawful behavior related to conflicts of interest Signup and view all the answers

What does the principle 'Self' primarily promote among professionals in the financial services sector?

Avoiding any acts that may damage personal reputation Signup and view all the answers

What is a significant expectation placed on professionals in the securities and investment industry by the CISI's Principles regarding accountability?

Avoiding any acts that may damage the profession's reputation Signup and view all the answers