Regulation of Financial Markets notes

Regulation of Financial Markets notes

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Table of Contents

  1. Introduction to Law
    • Nature, purpose and classification of law
    • Sources of law
    • The court system; establishment, composition and jurisdiction;
    • Fundamentals of the law of contract: definition; classification; formation; terms of a contract; vitiating factors; illegal contracts; discharge of contracts; remedies for breach of contracts; limitations of actions
    • Fundamentals of the law of agency: nature of agency; formation of agency; authority of agents; duties and rights of principals and agents; personal liability of agents; termination of agents

2.                  Financial markets regulatory institutions

  • Historical development of the law and regulations governing financial markets
  • Objectives of regulation; need for regulation of financial markets
  • Regulatory strategies in financial services
  • Financial market regulators (as applicable in Kenya or other jurisdictions where relevant): central banks; capital market authorities; deposit insurance corporations and deposit insurance funds; insurance regulatory authorities; retirement benefit authorities; sacco societies regulatory authorities; unclaimed financial assets authorities; competition authorities or equivalent bodies
  • Professional bodies in financial services- Institute of Certified Investment and Financial Analysts (ICIFA)
  • Regulations in the international financial markets

3.                  Regulations of Capital Markets

  • The Capital Markets Authority (CMA) – Powers, functions and roles
  • Investor Compensation Fund (ICF)
  • The Capital Markets Tribunal: Powers, functions and roles
  • The Capital Markets Fraud Investigations Unit
  • The International Organisation of Securities Commissions principles relating to the regulator

4.                  Financial market intermediaries

  • Requirements for licensing of market intermediaries
  • Market intermediaries:
    • Investment Banks, Stock Brokers and Dealers
    • Fund Managers and Investment Advisers
    • Credit Rating Agencies
    • Collective Investments Schemes (Unit Trusts and Mutual Funds)

4.2.4 Custodians/ Authorized Depositories

  • Online Foreign Exchange Brokers and Money Managers
  • REIT Managers and REIT Trustees
  • Foreign Exchange Bureaus
  • Private Equity and venture capital Firms
  • Savings and Credit Cooperative Societies
  • Obligations of licensed intermediaries: conduct obligations; client accounts; record keeping and reporting obligations
  • Roles of an authorised depository and when the appointment of a custodian is required

5.                  Central Securities Depository

  • The Central Depository Settlement Corporation
  • Establishment of the Central Depository
  • Role and duties of a Central Depository
  • Central Depository agents
  • Rules relating to Appointment of Central Depository Agents
  • Rules of a Central Depository
  • Structure of Central Depository Accounts; settlement of trades
  • Insurance of a Central Depository
  • The Business Conduct Committee of the Central Depository Corporation
  • Establishment and Management of the Central Depository Guarantee Fund

6.                  Securities Exchanges and Clearing Agencies

  • Establishment of Securities Exchanges
  • Role of the Securities Exchange
  • Membership of the Securities Exchange
  • The Board and committees of the Securities Exchange
  • Securities Exchange listing rules; listing process; role of advisers; eligibility and disclosure requirement; continuing obligations
  • Takeover and Merger Regulations
  • Foreign Investor Regulations
  • Derivatives Exchange Regulations: Requirements for Derivative Exchanges
  • Raising capital in the securities market: Initial Public offering, introductions, offers for sale of issued securities, Additional new listing of securities
  • Market Segments and Eligibility requirements: Main Investment Market Segment (MIMS), Alternative Investment Market Segment (AIMS), Fixed Income Securities Market Segment (FISMS) and Growth Enterprises Market Segment (GEMS)
  • Appointment and Responsibilities of nominated advisors, sponsoring stockbrokers and lead transaction advisor
  • Procedure for admission to listing of REITS securities
  • Suspension and delisting of securities listing and post listing requirements
  • Demutualization and Self-Listing of the Exchange
  • Cross border listing
  • Over the counter (OTC) markets and other multilateral trading facilities (MTF)
  • Clearing Agencies
  • The International Organisation of Securities Commissions (IOSCO) principles for self-regulation and enforcement of securities regulation

7.                  Investment Funds

  • Collective Investment Schemes (CISs): types of CIS; requirements for authorisation of a fund and the restrictions on advertising content; purpose and main contents of the information memorandum; role of the main participants in a collective investment scheme; rules surrounding the valuation and pricing of a fund and investor dealing
  • Exchange-Traded Funds (ETFs): characteristics of exchange-traded funds; Listing ETFs; Trading and Settlement
  • Real Estate Investment Trusts (REITs): Types of REITs; characteristics of REITS; Regulatory Requirement of REITS; Role of the REIT Manager; Role of the Trustee
  • Venture Capital Companies: characteristics of Venture Capital Companies; Eligibility Requirements for a Registered Venture Capital Company
  • Employee Share Ownership Plans (ESOPs): Creation of an ESOP; Scheme Requirements
  • Special Interest Schemes: characteristics; requirements for special interest schemes

8.                  Corporate Governance and Conduct of Business of Market Intermediaries

  • The concept of corporate governance
  • Objective of the corporate governance Regulations
  • Role of the Board, its committees and the Board Charter
  • Responsibilities of shareholders
  • Employees and prescribed Code of Conduct
  • Management of a market intermediary
  • Internal controls and risk management
  • Capital Markets Authority Audit
  • Conduct of business of market intermediaries
    • Principles when conducting business with the public
    • Know your client procedures
    • Client rights, contract notes, confidentiality, funds and complaints handling procedures
    • Purpose of the fair and clear communications rule
    • Rules surrounding cold calling
    • Rules surrounding the disclosure of charges
    • Required content of a client agreement
    • The concept of fiduciary duty
    • Rules around client confidentiality and access to client information
    • Conflict of Interest
    • Suitability of advice; investment advise process
    • Client Money: segregation of client money bank accounts; Operating Client Money   Accounts;  Reconciliation and    Accounting  Record; Registration of Asset
    • Unacceptable trading practices: front running; churning; insider dealing; market abuse; penalties for unacceptable trading practices

9.      Anti-Money Laundering and Combating the Financing of Terrorism

  • Money laundering, the process and related offences; suspicious transactions reporting
  • Financial Reporting Centre-objectives, functions and powers
  • The Anti-Money Laundering Advisory Board; Anti-Money Laundering obligations of a Reporting Institution
  • Money laundering checks: best execution rule; timely execution rule; timely and fair execution rule; contract notes rule; off-market transactions
  • Assets Recovery Agency (ARA)- functions, powers and funds
  • Criminal Assets Recovery Fund – functions, powers and funds
  • Role of the financial Action Task Force
  • Role of Egmont Group of Financial Intelligence Units
  • Role of Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG)
  • Role of United Nations Office on Drugs and Crimes (UNODC)
  • Customer Due Diligence requirements for natural persons, legal persons, partnerships and trusts
  • Counter Financing of Terrorism: Inter-Ministerial Committee – Functions and powers of the Committee; mechanism for coordinating counter – terrorism measures
  • Enhanced due diligence measures
  • Establishment of ultimate beneficiaries
  • Politically exposed persons
  • Correspondent relationships
  • Wire transfers
  • Legitimacy of source of funds

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