3 - Conduct of Business and Client Asset Rules

Question 1

When can a firm execute a client order outside a regulated market or multilateral trading facility?

Answer 1

If there is prior consent from all customers

Question 2

What is the requirement for record keeping in respect of a firm conducting MiFID business?

Answer 2

5 years

Question 3

When must a firm must take reasonable steps to manage any conflicts of interest with respect to independent research?

Answer 3

The firm is making a recommendation to the client

Question 4

When is the latest a confirmation can be sent to a client following a transaction?

Answer 4

The business day after the transaction was arranged

Question 5

For what sort of trade must a retail client be assessed for appropriate levels of knowledge by the firm?

Answer 5

Executing a deal on an equity warrant

Question 6

What is the minimum amount of net turnover that a trust must have to be classified as professional client for MiFID business?

Answer 6

€40 million

Question 7

When a firm is acting as an investment manager, periodic statements must always be sent to which types of client?

Answer 7

Retail and professional clients resident in the UK

Question 8

What is considered Client Money?

Answer 8

Money held in excess to a client’s obligations

Question 9

How soon does an analyst need to tell Compliance if they bought UCITS units?

Answer 9

There is no need if the analyst has no management relationship with the CIS

Question 10

What products can firms sell to retail clients through a cold call?

Answer 10

Generally marketable low volatility packaged product

Question 11

What is durable media under COBS?

Answer 11

Media which can be accessed by a person and which allows unchanged reproduction of the information stored on it

Question 12

If a firm communicates with a client solely by telephone, when must information on any agreement be provided?

Answer 12

In good time before the consumer is bound by a distance offer or contract

Question 13

What must be included in a financial promotion to comply with FCA rules?

Answer 13

Capital at risk products are stated as such

Question 14

When may a firm treat a client as an elective professional client for non-MiFID business?

Answer 14

The qualitative test is passed and there is a statement that protection will be lost

Question 15

What information must always be included in a firm’s order execution policy for retail clients?

Answer 15

The process the firm uses to specify relative importance of the execution factors

Question 16

When can a UK firm communicate an unsolicited real time financial promotion to an overseas person?

Answer 16

When it complies with the UK COBS

Question 17

What 3 investment services are exempt from the client agreement rules?

Answer 17

-Transactions with authorised persons
-Acting as the trustee of a unit trust scheme
-The supply of published recommendations

Question 18

When must a firm disclose a conflict of interest?

Answer 18

Only if they are unable to manage it

Question 19

How long must records of a pensions transfer be kept for?

Answer 19

Indefinitely

Question 20

What is a Packaged Retail Investment Product?

Answer 20

Any investment whose value is affected by the value or performance of another product (or products) not directly bought by the investor

Question 21

How often must a retail client get a periodic statement of their non-leveraged security based account?

Answer 21

At least every 3 months

Question 22

When can a firm aggregate a client’s order with an own account order?

Answer 22

When it is likely that the aggregation will not work to the disadvantage of each of the clients concerned

Question 23

How long must a firm keep records of any communicated or approved promotion of personal pension schemes?

Answer 23

6 years

Question 24

When a financial adviser requires information on a client from a third party, what must the adviser receive from the client?

Answer 24

A letter of authority

Question 25

What compensation does the Pension Protection Fund provide those who haven’t retired if their scheme goes bust?

Answer 25

90%

Question 26

How long must businesses keep records to enable them to complete and justify a tax return?

Answer 26

6 years

Question 27

What is the first step in the financial planning process for a retail client?

Answer 27

Establishing the client’s objectives

Question 28

When must a UK investment firm undertake enhanced due diligence before onboarding a new client?

Answer 28

Where the client is a politician in a country that is not the UK

Question 29

How often must a statement in funding principles drawn up in relation to an occupational pension scheme be reviewed?

Answer 29

Every 3 years

Question 30

What can a firm providing investment advice to retail clients use dealing commission to purchase?

Answer 30

Nothing as this would be classed as inducement

Question 31

What are the 2 main features of a Client Money designated bank account?

Answer 31

-When the bank fails the money is not to be pooled with other clients accounts
-Where the investment firm fails the money is pooled with other clients accounts

Question 32

What must a firm adopting an alternative approach for its treatment of client money send to the FCA?

Answer 32

Confirmation from external auditors that it has in place the required systems and controls to operate an alternative approach

Question 33

How often does the FCA require firms to conduct external reconciliations between its accounts and those of 3rd parties holding client money on their behalf?

Answer 33

As often as necessary