2.1.6) Recategorising Clients and Providing Higher Levels of Protection

Question 1

Request Recategorisation: Professional Clients and ECP’s

Answer 1

Firms must allow professional clients and ECP’s to request recategorisation, to retail client and professional client respectively, so that they can be afforded the benefit from the higher protections if they wish to be

Question 2

Recategorising Clients: Firms initiative / Clients Request

Answer 2

In addition, firms can own their initiative, or as well as at the clients request

• treat per se professional clients as retail clients, and
• treat per se ECP’s as professional or retail clients

In addition, recategorisation may be carried out for a client on:

• general basis, or
• more specific terms, for example, in relation to a single transaction only

Question 3

Recategorisation: Financial instruments

Answer 3

• a firm can classify a client under a different classification for different financial instruments in which they may trade / undertake transactions

(However, this will mean complex internal arrangements for firms and this is why most firms will classify a client just once for all financial instruments for which they may undertake transactions)

Question 4

Notifications of client classification

Answer 4

• new clients must be notified of how the firm has classified them
• they must also, before services are provided, be advised of their rights to request recategorisation and of any limits in their protections which will arise from this

Question 5

Policies, Procedures and Records

Answer 5

• firms must implement appropriate written internal polices and procedures to categorise their clients
• firms must make a record of the form or each notice provided and each agreement entered into

(This record must be made and retained for the relevant period after the firm ceases to carry on business with clients)