Chapter 4 Flashcards
COBS designated investment business
- Dealing, broking, advising and managing designated investment business.
- Designated investment business can be split into MiFID and Non-MiFID
MiFID - Shares, Bonds, derivatives
Non MiFID - Packaged products, retail investment products
Electronic media communications - websites
- Applies to all clients:
Firms can communicate with clietns via a website if: - There is evidence the website is an appropriate method of communication
- the client has consented to the method of communication
- client is notified of the web address electronically
- ifnormation is kept up to date
- the information must be continuously accessible for as long as the client needs it
Electronic media communications - voice recordings (phone calls) and otehr electronic comms
Must be good quality and kept for 5 years when relating to:
* receiving/executting Client orders
* arranging for a client order to be executed
This is form wuaifying investments that trade on a prescribed mkt.
- includes communications via fax, email, instant messaging etc
- applies to comms with any client or eligible coutnerparty
MiFID Client categorisation - professional clients
- Either a per se professional or an elective professional (opt up/down)
To be a per se professional clients must:
* Be an authorised/regulated firm
* government, central bank, supranationals
* other institutional investors (SPVs)
* Large undertakings
large undertakings must satisfy 2 of the below
* Balance sheet of EUR20 million
* Net turnover of EUR40 million
* Own funds of EUR2 million
MiFID Client categorisation - elective professionals tests
Qualitative test
* Required for all business
* Firms must assess expertise, experience and knowledge to provide reasonable assurance around a person’s capacity/understanding.
Quantitative test
2 of the following must be met
* Avrg trade frequency of 10 trades per quarter over the previous 4 quarters
* Portfolio value of more than EUR 500K
* works/worked in fin. svs. sector for 1 or more years in a professional capacity.
Procedure for classification
* Written intent from the client to be classed as a professional
* written warning to the client that they will lose certain protections
* written client consent to lose the protections.
MiFID Client categorisation - eligible counterparties
- Eligible counterparty is either a per se eligible counterparty or an elective eligible counterparty
- The classification can only be given to parties dealing ontheir own account and/or executing orders on behalf of clients
Per se eligible counterparties
Certain per se professional can conduct ECP business:
* Authorised/regulated firms
* Govts, central banks and suprantionals
MiFID Client categorisation - recategorising clients as elective eligible counterparty
- Only can be done by per se professional clients (that are not individual investors).
- The firm must obtain client confirmation to be treated as an eligible counterparty
Classifying agents acting on behalf of client for MiFID
- Where the firm is dealing with A and A is acting on behalf of B (who is another person employing A to act for them) then A should be treated as the client.
Exceptions:
* there is a written agreement between the firm and the agent (A) to treat B as the client
* the purpose of using the agent is to avoid duties owed to B - ie get access to MiFID prods if B is a retail client.
Reliance on information provided by other organisations
When firms need to rely on info provided by another organisation:
If the info is received from a MiFID firm:
* a firm may rely on the info and recommendations
If the firm is a non-MiFID firm the firm receiving the info can only rely on it if:
* teh info is in writing
* the non-MiFID firm is independant
* the non-MiFID firm is competent (is MiFID accountable)
Financial promotions - what are they + regs
- Fin promo= invitation/inducement to engage in nvestment activity communicated in the course of business
- S21 of FSMA 2000 states firms must not communicate a financial promotion unless:
1. They are an authorised person
2. the content has been approved by an authorised person (who takes responsibility for the promotions)
Approval and exceptions to financial promotions
approval of fin promotions
* Before approving a fin. promo. firms must confirm that it meets the relevant regs.
* Firms communicating fin promos produced by a third party won’t breach the rules if:
1. an authorised person has approved the promotion
2. communicates the promo only to the intended audience
3. prmotion has not ceased to be fair, clear and is not misleading
Exceptions
* exempt under the financial promotions order (FPO)
* from outside the UK and cannot have an effect within the UK
* subject to takeover code or any other code
* personal quotes or illustrations
* one-off promotions that are not cold calls
