Chapter 2 COBS Flashcards
What is COBS 2.1? Who does it apply to
Act honestly fairly and professionally or clients best interest
MiFID business on retail and professional
Non-MiFID: retail only
What is COBS 2.3? Who does it apply to
Inducement. MiFID and non-MiFID on retail and professional only
Ban inducements if?
IDE
IDE?
Impair, disclosure, enhance
Is non-MiFID exmept from any of the IDE
Non-MiFiD exempt from disclosure and enhance
What type of marketing does FPO relate to.
All types
What is S21 of FSMA (FSMA 21).
WHat is the penalty?
Offence to issue financial promotion unless issued or approved by authorised firm
-2 years and or unlimited fine
What does COBS 4 relate to
COBS 4 relate to FPO
What are some instruments excluded from the FPO?
home purchase plans,
non-investment insurance contracts, unregulated CIS
credit agreements
What are some exemptions to the financial promotion rules?
Communication with journalist government,
prospectus and supplementary prospectuses approved by FCA,
promotions made to HNWI and investment professionals etc.
Prospectus passported into the UK by EEA
Can a firm cold call a client?
No unless:
-existing relationship
-relates to generally marketable product (not a life policy linked to a fund)
-relates to a controlled activity relating to a limited range of investments
What is COBS 4.10
Authorised person approving FPO
What is Criteria for large undertakings of MiFID
20 BS, Revenue 40, own funds 2 -> all euros
What is criteria for non-MiFID if large undertaking
-Called up share capital 5mil pounds
-BS 12.5, Revenue 25, or 250 employees
Trustee of pension scheme with 50 members and 10 mil
What is the main difference between ECP and Professional clients?
ECP cannot include large undertakings and can only provide 5 types of business
What are the ECP businesses?
ADREA
ADREA?
Arrange, deal, receive, execute, ancillary
What are some services not included to be ECP (meaning that if firms provide these, they become professional)
Investment management and advice
How can retail be elected professional?
-firm assess expertise
-Quantitative test: portfolio >500,000 and 10 transactions past 4 quarters
What is SYSC10
Conflicts of interest
What is COBS 12
Relating to investment research and non-independent research
What is COBS 11 about?
Personal account dealing
What kinds of personal account dealing are not applied to?
REP
What is REP?
Robo, ETF, life policies
What is COBS 9 and 11
COBS 9 = Advising and suitability
COBS 11 = PAD
Who does COBS 9 relate to
COBS 9 only relate to non-MiFID firms and only RETAIL CLIENTS
-relate to recommendation, management of investments to retail clients, manage assets of pension schemes
Who does COBS 9A relate to?
MiFID firm:
-advice and portfolio managemnet
-advice to insurance-based investment product
What information to get from client to assess suitability
Knowledge, financial situation,objective
When is it required to submit suitability report
-When Non-MiFID makes a personal recommendation to a client
-When it relates to life assurance policy
-acquire any insurance related for non-MiFID
-When MiFID provides investment advice to retail clients
What are exceptions to suitability report
-regulated CIS
-if client lives outside UK
=reommendation is to increase premium of existing contract
invest additional single premium or single contribution to existing packed product
Who can be ECP?
Per se professional (except institutional investor) and
Elected professional
How should client orders be handled?
Allow comparable client orders to be executed in the order in which they are received
What should firm ensure when handling client order
promptly and accurately recorded and allocated
Who should company do when there are difficulty in executing the order
Retail clients need to be informed of any material difficulty, immediately
What is considered an exectuion venue
Liquidity provider, e.g. MTF, market maker etc.
What should company do when there is conflicts of interests
Disclose the sources of conflict before any transactions conflict
Who is best execution for?
Retail and professional
Requirement for retail to step up to professional
10m portfolio, 10 big trades/quarter in past 4 quarters, the person worked or has worked in financial sector, local pension scheme
How can retail step up to be an elective professional?
Non-MiFID -> Qualitative test
MiFID -> QUantitative test + qualitative
Can retail be an elective ECP?
No. Only large undertakings can opt up from professional to ECP
Who does COBS apply to?
all authorised firms.
However, DIB firms have limited application
What kind of clients are a CIS, insurance companies, pension funds
Professional
What amounts of protection does execution-only client have?
None
What are the difference between MiFID and non-MiFID businesses
MiFID: Core = dealing and managing
MiFID Ancillary = safekeeping, fx servces, investment research
Non-MiFID = insurance undertakings, emplyoee schemes, people administering etc.
What are the methods of communication covered by the FPO?
Direct offers and cold-calling
When does the suitability requirement for Non-MIFID apply?
-personal recommendation for investment to retail
-managing investment
-managing assets and stakeholder pension
When does suitability required for MiFID apply?
-Investment advice for portfolio
-investment advice for pension
To whom is upper tribunal accountable to?
Ministry of Justice
Who does PAD apply to?
Only persons doing DIB
For non-MiFID businesses, what are not financial promotions? (means they are EXCLUDED)
What about for MiFID business?
General media, image advertising, prospectus advertisements, non retail communication
-For MiFID: 3rd paty prospectus
