COBS 4 & 5

Question 1

COBS 4 Name

Answer 1

Communication with Clients

Question 2

Financial Promotions Intro

Answer 2

Law
Section 21 FSMA 2000

YOU must not communicate financial promotion unless

• You authorised person
• Content approved in advance by authorised person

Penalty = Same as breach of Section 19 ( General Prohibition)

2years jail + unlimited fine (both criminal + civil)

Question 3

Financial Promotion definition

Answer 3

Invitation or inducement to engage in any investment activity communicated in course of business

Question 4

FPO

Answer 4

Financial Promotions Order

List those FP that exempt from

FSMA 200 Section 21
Conduct of Business rules 4

example - venture capitalist financing

Question 5

Approving Financial Promotions

Answer 5

Before approval
confirm complies with COBS

FIRM communicate FP created by another firm

• Establish authorised firm has approved promotion
• communicate to only who it is intended for
• Check still fair, clear and not misleading

Question 6

Communication to retails clients

Answer 6

• firm name
• clearly identifiable as FP
• Accurate and fair detail
• Comprehensible communication
• Don’t obscure important items, warnings

Question 7

Past Peformance

Answer 7

• must not be most prominent
• cover at least 5 years in complete 12 months period
• reference periods and sources included
• State not indicator of future performance
• Currency stated and waring of currency risk if relevant
• disclose effect of fees and commissions if gross performance shown

Question 8

Simulated Performance

Answer 8

New product

Must be based on actual performance of similar index/investment

Comply with rules for past performance

Warning that past performance no guide to future

Question 9

Future Performance

Answer 9

Extrapolating future performance from past data

• must not based on simulated past performance
• assumptions reasonable and supported by objective data
• disclose effect of fees and commissions if gross performance shown
• Warn forecast not reliable indicators of future performance

Question 10

Direct Offers or Invitations

Answer 10

E.g. direct mail

FP contains method of response for client to invest in product
e.g. application form (risk - binding contract, no advice)

contain sufficient info to enable person to make informed assessment (fact sheet, prospectus)

Question 11

Promotions not in writing

Answer 11

Real time - phone call, F2F meeting

Both solicited + unsolicited ;

• Fair , clear and not misleading
• Employee of firm must identify;
  themselves
  employer
  purpose of call

Confirm if client wishes to continue with call
Provide contact point
appropropriate time of day

Question 12

FAIR

Answer 12

Unbiased view of both benefits + risks

Question 13

CLEAR

Answer 13

Readily understand by client at who comms is directed

Question 14

Not misleading

Answer 14

Truth , truthful

Question 15

Cold Calls

Answer 15

Unsolicited

Permitted if;

• existing client ; opts into telephone marketing
• Call relates to generally marketable packaged products (not a high volatility fund)
• Call relates to servies (advice) where evolves realisable securities (shares, bonds, gilts, money market instruments)

Question 16

Packaged products

Answer 16

Life Insurance policy

Pension Sheme

Regulated collective investment scheme

Interest in an investment trust savings scheme

Question 17

COBS 5 Name

Answer 17

Distance Communications (internet, email)

Question 18

Electronic commerce directive

Answer 18

Removes restrictions on cross- border provision of e-commerce services (e.g. internet, email)

Introduces country of origin (home state) approach to regulation of e-commerce activities

Question 19

Distance Marketing Directive

Answer 19

Ensures, no face to face contact between customer and the firm, retail customers

• are given minimum specified info about financial product (KID)
• have a right to cancel