Chapter 3 - The Conduct of Business and Client Asset Rules Flashcards
Who does COBS apply to (and indirectly to?)
Apply directly to firms conducting
designated investment business from an establishment maintained by them (or
their appointed representatives) in the UK
* The COBS, therefore, apply indirectly to appointed representative
Define customer, client, and consumer
Customer – Retail client and Professional client
Client – Retail client, professional client and eligible counterparty
Consumer – A natural person, who is also a retail client
Name some ‘Per Se’ professional clients
Customer – Retail client and Professional client
Client – Retail client, professional client and eligible counterparty
Consumer – A natural person, who is also a retail client
Criteria for MiFID Large Undertaking
Balance sheet €20m
Net turnover €40m
Own funds €2m
Criteria for non-MiFID Large Undertaking
Balance sheet €12.5m
Net turnover €25m
Average number of employees: 250
Elective Prof. Client (non MiFID business)
Qualitative test only
Elective Prof. Client (MiFID business)
Qual and Quant
Procedure of Elective Prof Client
-Written intent from client to be classified as professional
- Written warning to client explaining lost protection
- Written client consent to lost protection
Example of Per Se Eligible Counterparties
- Authorised/Regulated firm
- Government, central bank, supranational
Example of Elective Eligible Counterparties
Available to any undertaking that is a per se professional client
Under S21 FSMA 2000 (for financial promotions)….
- The content has been approved by an authorised person; or
- The communication is exempt under the Financial Promotions Order
In promotions, comms with retail clients must ensure…
- Name of the firm is included
- Details are accurate
- The promotion is comprehensible
- The promotion does not obscure important points
- Such communications will undoubtedly be seen by those for whom it was not intended
- Ensuring social media complies with all FCA requirements is therefore necessary
Financial Promotions to Clients (Past Performance)
- Must not be the most prominent feature
- Cover at least five years (or life of investment) in complete 12-month periods
- Reference periods and sources must be clearly shown
- State this is not an indicator of future performance
- If relevant, currency stated and warning of currency risk provided
- Disclose effect of fees and commissions if gross performance shown
What is a direct offer financial promo
A financial promotion that enables a person to enter into an agreement with the firm in a specified manner
What do non-writing promos include?
- Must be fair, clear and not misleading
- Must identify:
- The caller
- Their employer
- The purpose of the call
- Ask whether the client wishes to continue
- Provide client who has an appointment with contact point in the event of a cancellation
- Communicate at an appropriate time of day
