COBS: Accepting Clients and Product Disclosure Flashcards
what type of general information do firms need to provide when starting business with a client (6 things), which clients does this apply to and how is it presented
name and address of firm
method and language of comms
name and contact details of competent authority
whether firm is acting through appointed representative
nature, frequency and timing of performance reports
if a common platform firm, the conflicts of interest policy
this applies to all clients, presented in an initial disclosure document before engaging in business
which types of people need to be provided with a formal client agreement
professional and retail clients
who is exempt from the client agreements rule
ECPs
insurance where the firm acts as principal
what are the rules on timing in providing client agreement
generally should be provided in good time before the customer is bound by the agreement
however, firm may provide client agreement immediately after customer is bound by the agreement where it was impossible to supply the agreement earlier e.g. agreement concluded via distance comms
when are trail commissions allowed
never allowed
what does the retail distribution review say about firms before making personal recommendations
they must be independent or restricted before making personal recommendations to clients
what does the retail distribution review say about remuneration
adviser charges agreed in advance with the client as early as practicable in a durable medium or via a website
no commissions from the product provider are permitted
clients can choose to either pay adviser charge up front or have it deducted from their investment over time
what does the retail distribution review say about disclosure on costs
must disclose adviser status and the cost of the service before providing a service or before the client is bound by any agreement
what is the purpose of the product disclosure rules to retail clients
to provide enough information about the nature and risks of a product to enable a retail client to make an informed decision
what are the three types of documents under product disclosure rules and for what do they apply
Key information document - PRIIPs
key investor information - UCITS schemes
key features document - any non-PRIIP packaged product e.g. personal pension plan
what is the number of days to cancel under distance marketing directive for life products and pensions
30 days
what is the number of days to cancel under distance marketing directive for any other product e.g. ISAs
14 days
what are PRIIPs
packaged retail and insurance based products:
investment funds
insurance based investment products
retail structured deposits
structured term deposits
can UCITS funds be freely marketed to retail clients
yes
what is the purpose of inducement rules
to reduce risk of conflicts of interests
to who do inducement rules apply
retail and professional clients
what do the inducement rules say about fees and commissions for MiFID business
a firm must not pay to, or accept from, a person other than the customer, any fee, commission or non-monetary benefit UNLESS:
the fee is designed to enhance the quality of service to the customer
the fee does not impair the firms duty to act in the best interests of the customer
what do the inducement rules say about disclosure to customers regarding fees and commissions received or paid to a third party
the firm must disclose the existence, nature and amount of the fee to the customer before providing the service
what types of fees are permissible under the inducement rules
proper fees necessary for the provision of the business e.g. custody costs, settlement fees, legal fees etc
to what do the inducement rules not apply
minor non monetary benefits:
info relating to a financial instrument or service
written material to promote a new issuance
participation in conferences/seminars
hospitality such as food and drink during a meeting
to who do provision of research information disclosure rules apply
retail and professional clients
to what has the FCA disapplied the provision or research rules
alternative investment funds and CIS that invest mainly in non - mifid investments e.g. commercial property
what are the provision or research rules regarding charges
firm must apply a charge when providing research to other firms unless mkt cap under 200m pounds (the company the research is based on)
how must firms pay for research
direct payments out of its resources or
payments from a separate research payment account controlled by the firm
what must a firm providing research disclose
the budget as well as charges before providing services
annual info on the total cost each customer has incurred for third party research
does a firm need to regularly assess the quality and effectiveness of the research paid for
yes
