COBS

Question 1

What is the “acting honestly, fairly & professionally COB rule”?

Answer 1

Firms must act in line with client best interest (and act fairly, with honesty and professionally)

Question 2

Who does the acting honestly, fairly & professionally COB rule apply to?

Answer 2

Retail clients for DIB
All clients for MiFID business

dib = designated investment business

Question 3

What is the information disclosure COB

Answer 3

Before providing services, a firm must provide information to a potential client

Question 4

What information must be provided to a client under the information disclosure COB

Answer 4

1) Firm and its business
2) Investments & Strategies
3) Risks associated with strategies
4) Costs & Charges
5) Execution venues

Question 5

What is the inducements COB?

Answer 5

To prevent firms from providing a biased service as a result of payments / benefits

Question 6

Under inducement COBS, when can a firm accept a payment / benefit

Answer 6

When
1) The payment does not bias the service
2) When the payment improves the service for the client

Firm must disclose the inducement and how it improves the service

Question 7

What is the agent as client COB?

Answer 7

A firm can treat another firm as their client, even if they are working on behalf of another client

e.g. Firm 1 appoints firm 2 to do work for them with firm 3 - firm 3 treat 2 as client despite work being for firm 1

Question 8

What is the client categorisation COB?

How are they classified, and what does this change?

Answer 8

Classify client’s based on knowledge & experience
This determines the level of protection a client receives

Question 9

What are the 3 client categorisations?

Answer 9

1) Retail
2) Professional Client
3) Eligible Counterparties

Question 10

What are the two types of professional clients?

Answer 10

1) Per Se
2) Elective

Question 11

What are the two tests needed to opt up to elective professional client?

Answer 11

1) Quantitative Test
2) Qualitative

Question 12

What is the qualatitive test for opting up?

Answer 12

Knowledge
Experience
Education
Work

Question 13

What are the quantitative tests for opting up?

How many are needed?

Answer 13

1) Portfolio at least 500k eur
2) 10 trades per quarter on average
3) 1yr relevant work experience

2 of 3

Question 14

What is the disclosure requirements COB

different from information disclosure

Answer 14

Information that a firm must give to clients (the COB states what information and when)

differs from information disclosure in the sense that is only prior to a relationship

Question 15

Name 5 areas covered by the disclosure requierments COB

Answer 15

1) Costs and Charges
2) Services
3) Suitability
4) Conflicts of interest
5) Information about the firm