COBS and CASS Flashcards
How soon must the firm correct a discrepancy after completing a client money reconciliation?
ASAP
A firm discovers that an elective professional client’s portfolio has reduced in size to less than €150,000 and the number of trades has been reduced to an average of four per quarter over the last 12 months. What actions should the firm take?
Reclassify the individual as a retail client and notify the client of the action
If, during the reconciliation process, discrepancies are noticed, which of the following must the firm do?
If the reconciliation shows a discrepancy, the firm must make good any shortfall for which it is responsible. If another person is responsible, the firm should take reasonable steps to resolve the position with that person.
Where an investment bank is providing research to a fund manager a firm must apply a separately identifiable charge for this research. The FCA implemented changes under UK MiFID that fund managers do not have to pay if the research provided relates a company with a market market capitalisation below:
£200 million
Research on companies with a market capitalisation of below £200 million will be exempt – meaning that UK-based fund managers do not have to pay for this research. UK asset managers can continue to pay for this research if they so wish – due to operational limitations.
Which type of clients do the rules of churning and switching apply to?
Churning and switching are still considered against the interests of the clients. The FCA provides them as guidance to the suitability rules, rather than rules themselves. They cover advisory and discretionary services for both retail and professional clients.
The COBS relating to financial promotions require an individual with appropriate expertise to check that the promotion is fair, clear and not misleading. For which of the following types of financial promotion is such a confirmation exercise required before issue?
Non real-time financial promotions
What are the exemptions to the COBS financial promotions rules?
The rules in COBS apply to firms communicating with clients regarding their designated investment business and communicating or approving a financial promotion exemptions apply:
* for qualifying credit, a home purchase plan or a home reversion plan
* a promotion for a non-investment insurance contract, or
* the promotion of an unregulated CIS which it is not permitted to approve.
The majority of the financial promotion rules do not apply to eligible counterparties.
For best execution in COBS, what are the possible execution venues?
Regulated market
MTF or OTF
Systematic internaliser
Market maker
Other liquidity provider
A firm has just executed an order for a retail client. Within what period of time must the confirmation of trade be sent?
Within one business day
What information must always be included in a firm’s order execution policy for retail clients?
The process the firm uses to specify relative importance of the execution factors
Not necessary- specific exchange, price for the firm or FX rate.
When a firm trades with an ECP, which rules do not apply?
Selling and advising
What are the factors considered for best execution for a retail client?
Characteristics of the client
The order
The investment
Execution venue
Costs directly relating to execution such as execution venue fees and clearing and settlement fees
Excluded- costs payable to the firm that the client is dealing with.
A firm may treat an elective professional client for non-MiFID business if:
qualitative test is passed and there is a statement that protection will be lost.
Note- Quantitative test only used for MiFID business.
How often does a firm need to review its order execution policy?
COBS state it must be done regularly, and policy as a whole must be reviewed annually.
With regard to financial promotions, the need to be ‘fair, clear and not misleading’ applies to:
Retail clients only
