COBS 1, 2 & 3 Flashcards
COBS 1 Detail
COBS Applications
Applying to firms carrying out
Designated Investment Business
OR
conducting long term insurance business I relation to life policies
Clients Best Interest RULE - ACT
honestly
fairly
professionally
Exclusion of Liability
CANT EXCLUDE
FSMA + FCA rule for any client
General law for retail (unless honest + professional to do)
COBS 3 Name
Client Categorisation
COBS 1 Name
Application of COBS
PER SE Professional Clients
- Authorised regulated firm
- Government
- Central bank
- Supranational
Institutional Investors - SPVs
Large Undertaking
Example of PER Se Professional Client
BIG Company
Two of these;
1) Balance Sheet = 20 million euros
2) Net Turnover = 40 million euros
3) Own Funds = 2 million euros
Recatorising Clients RC - PC
Qualitative test (ALL BUSINESS)
Quantitive Test (MIFID BUSINESS ONLY)
Written Procedures recorded
Qualitative test (ALL BUSINESS)
Assess;
expertise
experience
knowledge
about capability + understanding
Quantitive Test (MIFID BUSINESS ONLY)
Two of the following three ;
- Average trade frequency : 10 per quarter over previous 4 quarters
- Portfolio greater than 500 euros
- Works or worked in Financial Sector for more than year in professional capacity
Procedure-
Written confirmation from client to be calcified as pro
Written waring to customer lost protection
Written client consent to loss of protection
Eligible Counterparties
Only to Eligible Counterparty business
Dealing + Broking
Available to per se professional clients
(except ab institutional investor)
Obtain client confirmation to be treated as eligible counterparty
COBS 2 Name
Conduct of Business Obligations
Acting as an agent
COBS 2
Agent acting on behalf of client then agent should be regarded as the client for the firm
Unless exception
Written agreement to treat B as client
Purpose of agency is to avoid firms duties owed to
Reliance on Others
MIFID Firms
Firm may rely on info and recommendations made by another MIFID firm
NON MIFID Firms
May rely on info
In writing
Third party independent
Third party competent
Inducements
Payment from firm to Firm win/retain business
MIFID II strengthen rules to prevent risk of conflicts on interest
Firm must not pay to/accept fee from person other than client unless
- Enhance quality of service to client
- Does not impair best interest of client
Firm must disclose existence before providing the service
Inducements and research
Must apply charge for research when providing to other firms
Receiving firms ;
Pay from own resources
Pay from separate Research Payment Account
Research Payment Account must be kept visible to clines
Info about the Firm
Initial Disclosure Document before engaging in any business
Name + address of firm
Statement of authorisation
Conflicts of interest policy
Safeguarding of client assets/money
Costs and associated charges
Compensation schemes
Execution venues
Method and language of communication
