Workshop 9

• Regulation and Ethics
• Why Regulation is Needed

  • Market Integrity
  • Ensuring Fairness
  • Efficiency
  • Competitiveness and Transparency
  • Investor Protection
  • Safeguarding Investor Interests
  • Disclosure requirements
  • Fraud Prevention / minimising misconduct
  • Systemic Stability
  • Preventing Financial Crimes
  • Monitoring Risk Exposure
  • Controlling leverage
• FCA has 3 key Operational Objectives

  • Protect consumers from bad conduct
  • Protect the integrity of the UK financial system
  • Promote effective competition in the interests of consumers
• PRA has 3 key Objectives

  • Promote the safety and soundness of firms
  • Ensure appropriate degree of protection for policy holders
  • Facilitate effective market competition
• International Regulators


  • Securities and Exchange Commission (SEC) (USA)
  • Dubai Financial Services Authority (DFSA) (Dubai)
  • Chinese Securities Regulatory Commission (CSRC) (China)
• Money Laundering


  The processing of criminal proceeds to disguise their illegal origin
• 3 Stages of money laundering

  1. Placement

  2. Layering

  3. Integration
• The cross-border nature of money laundering has led to international co-ordination to combat money laundering
• Financial Action Task Force (FATF)


  • Inter-governmental body, based at the OECD in Paris, developing and promoting international policies to combat money laundering
  • Issued recommended minimum standards for countries
• Terrorist Financing


  Terrorist groups often have links with other criminal activities - there can be overlap between anti-money laundering provisions and rules designed to prevent the financing of terrorist acts
• Differences between terrorist financing and money laundering

  • Terrorist financing can be difficult to trace and track - terrorist acts can be committed with small sums of money
  • It is difficult to identify when legitimate funds become terrorist funds
• Similarities between terrorist financing and money laundering
• Identity Fraud

  • Use of a misappropriated identity in criminal activity
  • Obtaining goods or services by deception
  • Using forged identity documents e.g. Passport or driving licence
• Identity Theft


  • Impersonation fraud
  • Using the identity of an other person without their knowledge or consent to obtain goods and services in that person's name
• Robust Customer Due Diligence (CDD) procedures


  • To verify the identity of a person applying for credit/Investment services/a new account/access to an existing account
• Types of internet-related crime

  • Advanced Cybercrime (High-Tech)
  • Cyber-enabled Crime
• Incidents Involving Cybercrime


  • WannaCry
  • Petya/NotPetya/Nyetya/Goldeneye
• Insider Dealing


  When confidential, price-sensitive knowledge and data is used to provide an unfair advantage when buying and selling securities
• The Criminal Justice Act 1993

  • Made insider dealing a criminal offence
  • Defines what is deemed to be inside information
  • Defines the situations that give rise to the offence of insider dealing
  • Defines who is deemed to be an insider
• Situations that give rise to the offence of insider dealing

  • An insider acquires or disposes of price-affected securities while in possession of unpublished, price-sensitive information
  • Encouraging another person to deal in price-affected securities
  • Disclosure of the information to another person (other than those permitted to know it)
• Market Abuse


  • A civil offence, subject to fines and sanctions by the regulator
  • Arises when financial investors have been unreasonably disadvantaged, directly or indirectly, by others who behave unlawfully
• Market Abuse Behaviours


  • Insider dealing
  • Public disclosure requirements
  • Market manipulation
• Insider Dealing


  • Arises when a person in possession of inside information uses it to deal, or to attempt to deal or to recommend or induce another to do so
  • Dealing includes acquiring or disposing of financial instruments to which the inside information relates, as well as to cancelling or amending an order that was made before having inside information in relation to that instrument
  • A person using the recommendation or inducement will also be insider-dealing where they know or ought to know that the recommendation or inducement is based on inside information
  • In the UK, the FCA judges what a reasonable person knows, or ought to know, in such circumstances
• Public Disclosure Requirements

  • Requires issuers to inform the public as soon as possible about inside information which directly concerns them
  • Disclosure must also be made to the officially appointed central storage mechanism where their securities are admitted to trading on a regulated market
  • There is an obligation to prepare and maintain insider lists of any person with access to inside information
  • Directors and senior executives (and their closely associated persons) who have regular access to inside information must notify both the issuer and the FCA of every account transaction relating to the issuer's shares, debt instruments, derivatives or other linked financial instruments
• Market Manipulation


  • Committed if a person carries out any of the specified activities or behaviours in Article 12 of MAR
  • These include giving false or misleading signals about the supply of, demand for or price of a financial instrument
  • Using fictitious devices or other deception or contrivance that is likely to affect the price of financial instruments
  • Certain other behaviours including collaborating to secure a dominant position over the supply or demand for a financial instrument or creating other unfair trading conditions including by algorithmic and high-frequency trading
• CISI Code of Conduct
• CISI Code of Conduct Principles

  • Personal Accountability
  • Client Focus
  • Conflict of Interest
  • Respect for Market Participants
  • Professional Development
  • Aware of Capabilities
  • Respect Others and the Environment
  • Speak Up & Listen Up