Chapter 3 Flashcards
who does the COBs rule directly apply to
an authorised firm who carrying out long term insurance business or designated business
who do the COBs rules indirectly apply to
an appointed representative of a firm
what does indirectly mean
the firm is responsible for the actions of the appointed representative
what type of business does COBs apply to
MiFID business mainly
if a retail client wants to become a per se professional client and they conduct MiFID business what tests do you need to pass
qualitative and quantitative
qualitative elective retail client test
assessing experiecne and expertise and knowledge of the client to proivde reassurance to the firm that the client possess the necessary capability
quantitative elective professional client test
must meet 2 of the following
- average trading frequency 10 per quarter over previous 4 quarters
- portfolio > 500k
- worked or works in the financial sector for more than 1 year in a professional capacity
what is the elective professional test for retail clients that carry out non MiFID business
only qualitative
what is a 3 step process to allow a retail client to opt up to a elective professional client
written intent from client to be classified as professional
written warning to client explaining lost protection
written client consent to lost protection
examples of professional client
authorised / regulated firms
central banks
governments
supranationals
what are the requirements to be a large undertaking for MiFID business
balance sheet 20 mill
net turnover 40 mill
own funds 2 mill
whar are the requirements to be a large undertaking for non MiFID business
balance sheet 12.5 mill
net turnover 40 mill
average number of employees 250
what are per se eligible counterparties
banks
governments
supranational firms
authorised / regulated firms
who can become an elective eligible counterparty
a large undertaking
under S21 FSMA 2000 a person can only communicate a finanical promotion when
they are authorsied / the content has been approved by an authorised person
it is exempt under the financial promotions order
what are exempt financial promotions
communications from overseas to overseas persons
any follow up communication
introductions to authorised persons made by clients
exempt persons
communications made to an investment professional
a breach of S21 FSMA 2000 can lead to
2 years in jail and an unlimited fine
who are covered by the communication rules
retail clients
what are the general communication rules
all communications are fair, clear and not misleading
what must you state in a financial promotion to a retail client
name of firm
accurate info
sources are made known
benchmarks are given
what are the rules surrounding past performance in financial promotions
they must not be the most prominent feature
cover a least 5 years of performance in complete 12 month periods
reference periods and sources must be clearly shown
state that this is not an indicator of future performance
dislcose the effect of fees and commissions if gross performance is shown
what is a direct offer financial promotion
a promotion that enables a person to enter into an agreement with the firm in a specified manner but doesnt include any personalised advice
what must be included in a non written financial promotion
must identify the caller, their employer, the purpose of the call
must ask whether the client wishes to continue
provide a client with a contact point to cancel an appointment if they have one
communicate at an appropriate point of day
what cold calls are permitted
if an existing client has envisaged a call
permitted to a retail client where the promotion relates to generally marketable packaged prouducts i.e. not volatile or if it relates to readily realisable securities other than warrants.