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Ethics and compliance

Cours : Ethics and compliance. Recherche parmi 245 000+ dissertations

Par   •  11 Mai 2017  •  Cours  •  591 Mots (3 Pages)  •  245 Vues

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Ethics and compliance cours 1.

PART ONE : The international regulatory environment

Goal : improving and ensuring the well functioning of the financial system.
Consumer and investor protection. Overall stability of the financial system.

Compliance : to implement rules and regulation put in order in the government to reach these goals.

AMF/ACPR
FCA in the UK.
BAFIN in Germany.
SEC aux US.

Achieve better allocation in fonction and to avoid market failures. Idea of appropriateness and suitability.
The failure of one actor (systemic) can have large and negative impact for the economy as a whole.

Imperfection arise as a reason of costly barrier to entry.
Can investors process infomation rationally ?
Moral hazard, adverse selection.
Regulation can be use by special interest groups in the industry.
It increases the cost of entry into the market. You have to put in place all mesures in system.

Goals of financial regulation : Duty of core means not selling high risk investment.
Three headings in terms of market :
Markets -> Transparency on tradings pre and post trade transparency requirements, volume, price, name of the intrument.
RIE « Recognized Investment Exchanges » in France we have Euronext.
A fragmentation of markets and increase risk = increase regulation

RIE (traditional Euronext) VS MTF/ECN


Acting in information that are not in public domain yet and are price sensitive. Prohibition of insider trading (market manipulation)

Euronext is the market operator

Shareholders prospectus, listing when you issue more share. Information requirements for issues.
Financial reporting.
Overall stabilityy of the financial system, this has been highlighted by the recet crisis.

Sometimes competition between stability of the financial system and fair and orderly markets.
Stability of the financial system -> Capital adequacy requirements (BASEL Regulation)

Prudential supervision : in terms of the financial stability (capital requirements), initially and liquidity (easily transformable into cash) visible in the case of the bank run’s.

Banks Type of risks : - Credit risk (default by a borrower)

  • Country risk
  • Market risk (assets you invested into failed into value)
  • Interest rate risk
  • Liquidity risk

Strategies of regulation : - entry (licensing requirements)

  • Proper (individuals : when you recruit investment advisors you look if they already go to prison) The more responsibility you have the proper requirements you have
  • Conduct : In the uk the conduct of business rules « COBRULES »
    Cobrules : dealing with clients, headling of client assets, management of conflics of interests
  • Information
  • Prudential rules (how much capital adequacy) and how liquid assets are
  • Set rules in terms of resolution
  • Crisis resolution (insurance scheme deposit insurance scheme)
  • Enforcement powers of regulators (regulators have various role to fulfill they need to monitor activity, to maintain protection for investors, make prevention programs, making firm aware, remending them them to put attention to certain aspects, preventory programs and investigation and enforcement program. This can include inspection and on site expected or unexpected)
    Interms of enforcement powers for the regulator : power to investigate, the power to take action and the power to impose sanctions(administrative, take actions) he can initiate a criminal procedure

In terms of regulation strategy , fims need to be authorized by the regulator to make invesment activities, in order to be authorized you need to show a certain things (ressources, skills, knowledge of your employees), the ethical profil of the firm and the intended employees), capital adequacy ( the ability of the firm to absorb losses in the event of adverse market move), obligation to follow conduct of business rules (proper management of risks)

Then last requirement is to put in place an internal compliance function, it monitors the adherence of the firm employees to the regulators’ standards and rules.

Models of regulation : How rules are created ?

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