If you work for an investment bank and need to know what regulations you are subject to, and what their main aims and requirements are, this article is for you.
Investment banking is a very broad term that can include dealing, arranging, managing, advising, safeguarding, and administering investments. As such, UK-based investment banks answer to several regulators, notably the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), Information Commissioners’ Office (ICO), The Pensions Regulator (TPR), and the Financial Ombudsman Service (FOS). Each regulator has its own set of regulations that place high expectations onto firms. Let’s explore the key requirements from each regulator, and the role of eLearning courses in aiding investment banking compliance.
In this article:
- Investment banking compliance and FCA regulations
- Investment banking compliance and PRA regulations
- Investment banking compliance and ICO regulations
- Investment banking compliance and TPR regulations
- Investment banking compliance and FOS regulations
- Investment banking compliance and other regulations
- Simplify investment banking compliance with Ciphr eLearning
- About the author
Investment banking compliance and FCA regulations
The UK MiFID Framework
The UK MiFID (Markets in Financial Instruments Directive) Framework governs markets in financial instruments in the United Kingdom. The UK MiFID Framework applies to a wide range of firms that provide services to clients linked to ‘financial instruments’, and the venues where those instruments are traded. These include investment banks, trading venues, data reporting service providers and credit institutions conducting MiFID business.
What are the aims of the UK MiFID Framework?
The regulation aims to:
- Enhance transparency by ensuring that trading activities are transparent to regulators and the public
- Protect investors through stringent conduct of business requirements
- Improve market integrity by ensuring robust systems and controls within firms are designed to prevent market abuse and ensure that markets operate fairly and efficiently
Want to help your teams learn more about the Framework, including its structure, consequences of non-compliance, and future development? Our UK MiFID Framework eLearning course is here to help
The UK EMIR
The UK European Market Infrastructure Regulation (UK EMIR) is a regulatory framework that governs derivatives, central counterparties and trade repositories in the United Kingdom. It was introduced by the FCA to increase transparency and market stability by reducing the risks associated with the over-the-counter (OTC) derivative market following the 2008 financial crisis. The UK EMIR applies to a broad range of entities involved in derivatives contracts, including investment banks and other financial and non-financial counterparties.
What are the aims of the UK EMIR?
The regulation aims to:
- Enhance transparency: mandatory reporting of derivative contracts to trade repositories ensures that regulators have a clear view of market activities
- Reduce systemic risk: central clearing of certain OTC derivatives through central counterparties (CCPs) helps mitigate counterparty risk
- Increase market integrity: risk mitigation techniques and stringent standards aim to prevent market abuse and ensure fair trading practices
Want to help your teams learn more about the Regulation, including its structure, consequences of non-compliance, and future development? Discover our UK EMIR eLearning course now
CASS
The Client Assets Sourcebook (CASS) regime is a set of rules and guidance designed to safeguard client assets held on behalf of clients by a range of financial institutions, including investment banks. Firms must follow the rules set out in the sourcebook where they hold or control client money or safe custody assets as part of their business.
Although other regulations such as the UK MiFID framework recognise the risk of client assets being mishandled or lost, the CASS rules are written specifically to align with the implications of insolvency of a UK firm. This enhances the integrity of the UK’s financial system as it gives people and firms confidence that their money is protected.
What are the aims of the CASS regime?
The principle aim of the regime is to ensure the protection and segregation of client assets to prevent misuse or loss, notably in the event of a firm failure. The CASS regime existed before the financial crisis. But the collapse of Northern Rock in 2007, Lehman Brothers in 2008, and NF Global in 2011 has brought the regime into ever-sharper focus.
Want to help your teams learn more about the Regulation, including its structure, consequences of non-compliance, and future development? Discover our CASS eLearning course now
The Senior Managers & Certification Regime (SM&CR)
The Senior Managers and Certification Regime (SM&CR) was introduced by the FCA and PRA to enhance accountability and conduct standards in financial services firms after the 2008 banking crisis. It has applied to all financial services firms, including insurance firms, since December 2018.
What are the aims of the SM&CR?
The SM&CR is a crucial framework designed to foster a culture of responsibility and integrity within financial services firms, to protect consumers and enhance the stability of the financial system. Its three main aims are to:
- Enhance accountability
By ensuring that senior managers are clearly accountable for their areas of responsibility, it encourages staff to take personal responsibility for their actions.
- Improve conduct standards
By setting basic standards of behaviour for all employees, it should improve conduct at all levels
- Increase transparency
By requiring firms to document responsibilities, firms and staff should clearly understand who does what, and be able to show this to the regulator.
We can help you and your teams get to grips with the SM&CR – including its structure, main requirements, and plans for future development. Take a look at our SM&CR eLearning course now
Investment banking compliance and PRA regulations
The IFPR
The Investment Firms Prudential Regime sets prudential standards for investment firms including banks providing investment services. As such, the PRA, the supervisory pillar of the Bank of England, is responsible for its implementation and enforcement in the UK.
The key requirements of the IFPR include:
- Permanent minimum capital requirement. This is typically at least £750,000 for larger firms (ie full-scope investment banks)
- Maintenance of adequate own funds proportional to the risks that the firm undertakes
- Liquidity risk management
What are the aims of the IFPR?
The overarching aim is to ensure financial soundness and resilience through capital and liquidity requirements. This in turn protects the wider financial system, which ties into the PRA’s core objective of promoting the safety and soundness of the UK financial system.
Want to help your teams learn more about the Bank of England, including its mission, structure, and key staff? Our Introduction to the Bank of England eLearning course is here to help
Investment banking compliance and ICO regulations
What is the ICO?
The Information Commissioner’s Office (ICO) is the UK’s independent regulator for data protection and information rights law. It upholds information rights in the public interest, promotes openness by public bodies, and data privacy for individuals. Over one million companies are registered with the ICO across a wide range of sectors including finance, government, health, and utilities. If a firm is processing personal information, it needs to be registered with the ICO.
The ICO enforces and oversees:
- Data Protection Act 2018 (DPA2018)
- General Data Protection Regulation (GDPR)
- Freedom of Information Act 2000 (FOIA)
- Environmental Information Regulations 2004 (EIR)
- Privacy and Electronic Communications Regulations 2003 (PECR)
What are the strategic objectives of the ICO?
The ICO has four strategic objectives:
- To safeguard and empower people by upholding information rights
- To empower responsible innovation and sustainable economic growth, by providing regulatory certainty about what the law requires, reducing the cost of compliance and clarifying what the ICO will do if things go wrong
- To promote openness, transparency and accountability, and to support the development of a modern Freedom of Information (FOIA) and Environmental Information (EIR) practice framework in the UK
- To develop the ICO’s culture, capability and capacity to deliver impactful regulatory outcomes, be recognised as an effective provider of public services and as a knowledgeable and influential regulator
Get better acquainted with the ICO. Our ICO eLearning course contains all your people need to know
Investment banking compliance and TPR regulations
What is TPR?
The Pensions Regulator (TPR) is responsible for regulating and protecting work-based pension schemes in the UK. These include defined benefit (DB), master trusts or broader defined contribution (DC) schemes, and public service pension schemes. It is also responsible for ensuring that employers comply with their automatic enrolment duties.
TPR works with employers, trustees, pension specialists, business advisers and those running pension schemes so that they can fulfil their duties to scheme members. It is an executive non-departmental public body sponsored by the Department for Work and Pensions.
What are the statutory objectives of TPR?
The statutory objectives are set out in the Pensions Act 2004 (amended 2014):
- To protect the benefits of members of occupational schemes
- To promote, and to improve understanding of, the good administration of work-based pension schemes
- To protect the benefits of members of personal pension schemes where direct payment arrangements are in place
- To reduce the risk of situations arising which may lead to compensation being payable from the Pension Protection Fund (PPF)
- In relation to DB scheme funding, to minimise any adverse impact on the sustainable growth of an employer
- To maximise employer compliance with employer duties and the employment safeguards introduced by the Pensions Act 2008
Help your people make sense of TPR. Check out our Introduction to the Pensions Regulator eLearning cours
Investment banking compliance and FOS regulations
What is the FOS?
The Financial Ombudsman Service (FOS) settles complaints between consumers and financial services businesses where they cannot reach a resolution themselves. It is a statutory dispute resolution scheme set up under the Financial Services and Markets Act 2000 (as amended). It works on a not-for-profit basis.
Over a million people contact the service every year. Once the FOS has assessed the facts of a case, it will make an independent and fair decision. Where necessary, it will use its powers to put things right for the consumer, including to require compensation payments to the consumer.
What are the values and commitments of the FOS?
Values
The FOS aims to:
- Do the right thing
- Treat their customers well and respect their needs
- Do what they say they will do
- Be inquisitive and build everyone’s knowledge
Commitments
Run a service with fairness at its heart
- Be a well-run and efficient service
- Earn the trust and respect of its customers
- Help everyone who needs its
- Share its knowledge to encourage fairness in financial services
- Attract, develop and keep staff who uphold their values
To learn more about the FOS, including how the FOS makes decisions, take a look at our FOS eLearning course
Investment banking compliance and other regulations
This article has outlined the key regulations that apply to investment banks. However, as a person working in an financially regulated company, you should also be aware of regulations that impact you personally such as those around gifts and inducements, whistleblowing, and treating customers fairly. Fortunately Ciphr has you covered: view all our FCA compliance eLearning courses here.
Simplify investment banking compliance with Ciphr eLearning
We’re here to help you get regulations right with effective eLearning courses that make an impact. Created together with the author of this article, Victoria Sena, founder of Cherrybank Consulting, our suite of compliance courses is designed for organisations that are regulated by the FCA, PRA, and other regulators. They’ll make sure that your firm remains up to date with the latest legislation and regulatory requirements. These off-the-shelf eLearning courses can be deployed in weeks – helping your teams get up to speed, fast. Or if you prefer a more tailored approach, we can work with you to customise our content or develop bespoke eLearning courses that deliver on your precise requirements. Speak with one of our expert advisors today to find out what’s right for you.
About the author
Victoria Sena is founder of Cherrybank Consulting, an innovative consultancy founded in 2019 with a wealth of experience in growing regulated financial businesses in the UK and internationally. Specialising in governance, operations, risk, and compliance, Cherrybank has worked with start-ups and scale-ups across the financial spectrum including banks, asset managers, funds, corporate finance advisers and open banking platforms. You can get in touch here.