COBS: Client Categorisation Flashcards
what is the purpose of COBS
allow the FCA to discharge its operational objective of securing an appropriate degree of protection for consumers when dealing with regulated firms
what classifies as a customer
retail and professional client
what classifies as a client
retail, professional and eligible counterparty
what classifies as a consumer
a retail client that is also a natural person
how are local authorities and municipalities classified
retail clients
can local authorities and municipalities be elective professional or elective eligible counterparties
can be elective professional when they meet certain requirements
can never be ECP
to who does client categorisation apply
all clients
what are classed as per se professional clients (there are 4)
any authorised/regulated firm
government/central bank/supernatural
other institutional investor e.g. special purpose vehicle
large undertaking
what is the criteria for a large undertaking to be a per se professional client for MiFID business
satisfy at least 2/3 of:
balance sheet 20m euros
net turnover 40m euros
own funds 2m euros
what is the criteria for a large undertaking to be a per se professional client for NON - MiFID business
a company with share capital/net assets of 5m pounds
a trustee of an occupational pension scheme with at least 50 members and 10m pounds assets under management
any company meeting 2/3 of:
balance sheet 12.5m euros
net turnover 25m euros
average of 250 employees
what are the two tests for elective professional clients and for which business do they apply
qualitative test (all business) - firm to assess expertise, experience and knowledge to provide reasonable assurance about capability or understanding
quantitative test (MiFID only) - meet 2/3 of: avg trade frequency of 10 per quarter over past 4 quarters, portfolio greater that 500k euros, works or has worked over 1 year in financial services
what is the procedure for a retail client to become an elective professional client
written intent from client
written warning to client about lost protection
written client consent to lost protection
what are the 3 types of eligible counterparty business and what does this mean
dealing on own account
execution of orders on behalf of clients
transmission orders
CANNOT be ECP for advisory services
who is classified as a per se ECP
most of the per se professional clients - authorised/regulated firms, governments and central banks
who can be an elective eligible counterparty
only large undertakings can opt up to ECP status or any per se professional clients
what is the procedure to become an elective ECP
obtain client confirmation to be treated as ECP
who cannot be an elective ECP
NOT special purpose vehicles or elective professional clients
if a client opts down to retail client, what does it give them fully and what does it not guarantee them
full protection under COBS
does not guarantee right of access to bodies such as the FOS and FSCS (which is for complaints and insolvency stuff)
who is regarded as the client when someone is acting as an agent for someone
the agent is the client
what is the exception to the agent being treated as the client
written agreement between firm and agent to treat the other as the client OR
if the purpose of the agency is to avoid duties owed to the other person
can a retail client opt up to ECP
no
can an ECP opt down to PC and RC
yes
who does acting as an agent apply to
all clients
who does reliance on others apply to
all clients
can a firm rely on information provided by another MiFID firm + who bares the responsibility
yes, can rely on info and recommendations, the providing mifid firm is responsible
can a firm rely on information from a non MiFID firm + who is responsible for accuracy of info
yes if:
the information is in writing
the non mifid firm is independent
the non mifid firm is competent
(mifid firm is accountable to assess this)
