CIFA Foundation Level
Regulation of Financial Markets flashcards
Read the question, say the answer to yourself, then turn the card to check. The first 10 of 49 cards are free; the rest come with the subject.
Card 1 of 49
Jump to a card
Complete Flashcard Reference
Review every card in this deck. Open any card to reveal its answer. The first 10 are free; the other 39 come with the subject.
Which Kenyan regulator oversees each financial sector?
CBK: banking and payment systems, monetary policy and currency stability. CMA: capital markets (exchanges, intermediaries, collective investment schemes, REITs). IRA: insurance. RBA: pension schemes. SASRA: deposit-taking SACCOs. KDIC: deposit insurance. UFAA: unclaimed financial assets. CAK: competition and consumer protection.
What five elements are needed to form a valid contract?
Offer, acceptance, consideration (something of value exchanged), capacity of the parties, and an intention to create legal relations.
What does the Investor Compensation Fund cover, and what does it not cover?
It compensates investors for losses arising from the default of a licensed market intermediary, for example a stockbroker misappropriating client securities or cash. It does not cover losses from ordinary market risk or a bad investment decision. It is funded by contributions from licensed intermediaries and administered by the CMA.
What must a firm show to be licensed as a market intermediary?
A fit and proper test passed by its directors, senior management and significant shareholders (integrity, competence, financial soundness). Minimum paid-up capital for the licence category. Professional indemnity insurance or an equivalent guarantee. Adequate systems, controls and qualified staff. Payment of licensing fees, then annual renewal.
How do the Investor Compensation Fund, the Central Depository Guarantee Fund and depository insurance differ?
Investor Compensation Fund: losses from a licensed intermediary's default generally. Central Depository Guarantee Fund: losses from a settlement default within the depository system; contributed to by Central Depository Agents. Depository insurance: the depository's own operational risk, such as a processing error.
How do an IPO, an introduction, an offer for sale and an additional new listing differ?
IPO: new shares offered to the public for the first time, raising fresh capital and listing at once. Introduction: a listing with no public offer of new shares, where shares are already widely held. Offer for sale: existing shareholders sell already-issued shares to the public; the company may raise no new capital. Additional new listing: a listed company issues further shares, such as a rights issue, to raise more capital.
How does a unit trust differ from a mutual fund or investment company?
Unit trust: a contractual structure, with a trustee holding the assets for unit holders. Mutual fund or investment company: a corporate structure, in which investors are shareholders.
What is the difference between front running and churning?
Front running: dealing for the firm's or an employee's own account ahead of a known client order large enough to move the price, to profit from the movement. Churning: trading a client's account excessively to generate commission. The test is turnover against the account's stated strategy, not whether each trade was defensible.
What are the three stages of money laundering?
Placement: illicit cash first enters the financial system, for example deposits below reporting thresholds across several accounts (structuring). Layering: funds move through a series of transactions to obscure the audit trail. Integration: the laundered funds re-enter the legitimate economy, for example as securities or real estate.
How does prudential regulation differ from conduct-of-business regulation?
Prudential: the financial soundness of the institution itself, its capital adequacy, liquidity and solvency. Conduct of business: how the institution treats its customers, fair dealing, disclosure, suitability and complaint handling.
What is the difference between public and private law?
This answer comes with Regulation of Financial Markets. Buy the subject
What are the sources of law in Kenya?
This answer comes with Regulation of Financial Markets. Buy the subject
What is the difference between a condition and a warranty in a contract?
This answer comes with Regulation of Financial Markets. Buy the subject
What remedies are available for breach of contract?
This answer comes with Regulation of Financial Markets. Buy the subject
What is the difference between an agent's actual authority and apparent authority?
This answer comes with Regulation of Financial Markets. Buy the subject
When is an agent personally liable on a contract made for a principal?
This answer comes with Regulation of Financial Markets. Buy the subject
Why are financial markets regulated?
This answer comes with Regulation of Financial Markets. Buy the subject
What role does ICIFA play beside the CMA?
This answer comes with Regulation of Financial Markets. Buy the subject
What are the main functions of the Capital Markets Authority?
This answer comes with Regulation of Financial Markets. Buy the subject
What does the Capital Markets Tribunal do?
This answer comes with Regulation of Financial Markets. Buy the subject
What are IOSCO's three objectives of securities regulation?
This answer comes with Regulation of Financial Markets. Buy the subject
Why must an intermediary segregate client money and securities?
This answer comes with Regulation of Financial Markets. Buy the subject
How do the roles of a REIT manager and a REIT trustee differ?
This answer comes with Regulation of Financial Markets. Buy the subject
Who licenses foreign exchange bureaus, and what do their licence conditions focus on?
This answer comes with Regulation of Financial Markets. Buy the subject
Why is the custodian kept separate from the fund manager?
This answer comes with Regulation of Financial Markets. Buy the subject
What does the Central Depository and Settlement Corporation do?
This answer comes with Regulation of Financial Markets. Buy the subject
What is a Central Depository Agent, and what must it hold first?
This answer comes with Regulation of Financial Markets. Buy the subject
What is the Business Conduct Committee?
This answer comes with Regulation of Financial Markets. Buy the subject
Who may be a member of the securities exchange?
This answer comes with Regulation of Financial Markets. Buy the subject
What are the stages of the listing process, and what applies after listing?
This answer comes with Regulation of Financial Markets. Buy the subject
What are the exchange's four market segments, and who is each for?
This answer comes with Regulation of Financial Markets. Buy the subject
How does suspension differ from delisting?
This answer comes with Regulation of Financial Markets. Buy the subject
What are demutualisation and self-listing of an exchange?
This answer comes with Regulation of Financial Markets. Buy the subject
What do the takeover regulations require once an acquirer crosses the control threshold?
This answer comes with Regulation of Financial Markets. Buy the subject
What do a nominated adviser, a sponsoring stockbroker and a lead transaction adviser each do?
This answer comes with Regulation of Financial Markets. Buy the subject
What must a collective investment scheme have to be authorised?
This answer comes with Regulation of Financial Markets. Buy the subject
What is an exchange-traded fund?
This answer comes with Regulation of Financial Markets. Buy the subject
What is the difference between a D-REIT and an I-REIT?
This answer comes with Regulation of Financial Markets. Buy the subject
What must a special interest scheme, such as a Shariah-compliant fund, satisfy?
This answer comes with Regulation of Financial Markets. Buy the subject
What two purposes does know your client serve?
This answer comes with Regulation of Financial Markets. Buy the subject
What must an intermediary disclose about charges, and when?
This answer comes with Regulation of Financial Markets. Buy the subject
What does a fiduciary duty require of an intermediary?
This answer comes with Regulation of Financial Markets. Buy the subject
What are the six steps of the suitability process, in order?
This answer comes with Regulation of Financial Markets. Buy the subject
What three penalty tracks can run at once for insider dealing or manipulation?
This answer comes with Regulation of Financial Markets. Buy the subject
What is the Financial Reporting Centre?
This answer comes with Regulation of Financial Markets. Buy the subject
What does the Assets Recovery Agency do, and on what standard of proof?
This answer comes with Regulation of Financial Markets. Buy the subject
What does enhanced due diligence add, and where does it apply?
This answer comes with Regulation of Financial Markets. Buy the subject
Who is a politically exposed person?
This answer comes with Regulation of Financial Markets. Buy the subject
What are the roles of FATF, the Egmont Group, ESAAMLG and UNODC?
This answer comes with Regulation of Financial Markets. Buy the subject
How to revise with these cards
- Answer out loud or on paper before you turn the card: recalling is what fixes it.
- Go through the deck in short sessions of ten to fifteen minutes, every day.
- Shuffle once you know the order, so you are not answering from memory of the sequence.
- When a card catches you out, read the chapter it links to, then try the topic in a past paper.