Conduct of Business 2 Flashcards
What is the minimum information that a member must obtain in respect of each client?
- Full name.
- Identity number or registration number.
- Physical and postal addresses.
- Telephone number.
- Legal status.
What is the minimum information that a member must obtain in respect of the beneficial owner of each controlled client account if the account holder is not a client but a person on whose behalf a client is acting as an agent?
- Full name.
- Identity number or registration number.
Is a member permitted to open a client account with a name other than that of a person with legal status?
No. Accounts may not be opened with fictitious names or names that do not represent a person with legal status, commonly referred to as trading account names.
Unless the client is a bank or a financial services provider or the foreign regulated equivalent of such entities, what information must be obtained in respect of the persons responsible for placing instruction on a client account if the person placing the instructions is not the individual in whose name the account is held or the account is not in the name of an individual?
- Full name.
- Identity number.
- Physical and postal addresses.
- Telephone number.
Other than obtaining the information referred to in rules 8.60.2 to 8.60.4, what are the other requirements regarding the prescribed information to be obtained from clients?
- All of the information must be confirmed by the client in writing and the member must maintain a record of such confirmation. Any changes to the said information shall be advised by the client in writing as soon as practicable.
- As a minimum, the identity of the client must be authenticated by the member and the member must maintain a record of the means of such authentication.
What must a member do before effecting a transaction with a person whom the member reasonably believes requires authorisation as a discretionary service provider?
Take reasonable steps to ascertain that such person has the required authorisation.
A member is required, at all times, to adhere to the best execution principle when acting for a client in the purchase or sale of equity securities. What is a member required to do to adhere to this principle?
- Take reasonable care to obtain the result which is the best available for the client, subject to the terms and conditions of the agreed mandate with the client.
- All transactions must be conducted through the central order book of the JSE equities trading system unless the execution of an off-book trade is in the best interests of the client.
What are the requirements as to how a member determines the value or rate of commission to be charged to a client on an agency transaction?
The commission must be mutually agreed with the client in advance of the transaction.
What is a member required to do before acting as a principal with a client?
Obtain the client’s prior consent.
Is a member permitted to charge a fee in respect of a transaction executed as principal with a client?
Yes, provided it has been mutually agreed with the client in advance of the transaction.
Other than the agreed commission, is a member permitted to make a profit on an agency transaction?
No
By what time is a member required to issue a client a contract note or transmit to a client, via electronic means acceptable to the JSE, a confirmation of a transaction?
By 12h00 on the day following the transaction.
What shall a contract note or electronic confirmation of a transaction in equity securities disclose?
- The date and time of the transaction.
- The identification number of the transaction.
- The amount and nature of the member’s charges in connection with the transaction.
- The price at which the transaction was executed and the total consideration due from or to a client.
- The settlement date of the transaction.
- Whether the member acted as an agent or as a principal in the transaction.
What is a specifically designated suspense account and what are the provisions regarding the use of such accounts in relation to the issuing of contract notes with average prices?
- It is an account to which a member may, with the prior consent of a client, initially book transactions.
- It may be opened either:
a. in the name of the client; or
b. in the name of an agent appointed by the client to transact on his behalf. - Transactions in the same security on the same day may be allocated from the suspense account to the accounts of the underlying beneficiaries at an average price based on the instruction of the client or agent.
- Contract notes or confirmations must disclose that the transactions are at an average price.
- The member must notify the client or agent that the prices and times of each transaction are available from the member on request.
In respect of which clients is a member not required to obtain consent to allocate transactions to such clients at an average price nor to notify the client that the prices and times of each transaction are available from the member?
Clients whose equity securities are managed by the member.
What must an ISP obtain from a client prior to managing JSE authorised investments on behalf of a client?
A written mandate recording the arrangement containing the minimum requirements prescribed by the JSE signed by the client or accepted by the client by electronic means.
What information is an ISP required to obtain from a client prior to exercising discretion in the management of JSE authorised investments on behalf of the client?
Information regarding the client’s financial situation, investment experience and particular needs and objectives in connection with the services required, to enable the member to make an appropriate investment decision.
In exercising discretion in the management of JSE authorised investments, what steps is an ISP required to take prior to making an investment decision, based on the information provided by the client?
- Conduct an analysis, based on the information obtained, for the purpose of making an investment decision.
- Identify the JSE authorised investments that will suit the client’s risk profile and financial needs, subject to the terms of any mandate provided to the member by the client.
In exercising discretion in the management of JSE authorised investments, what steps is an ISP required to take prior to conducting transactions in derivative instruments?
- Obtain consent in writing from the client authorising it to invest in derivative instruments on behalf of the client.
- Consider whether such investments are appropriate for the client in relation to the client’s financial situation, investment experience and investment objectives.
- Advise the client, in writing, of the risks associated with trading in derivative instruments.
In exercising discretion in the management of JSE authorised investments, what steps is an ISP required to take prior to entering into transactions in foreign investments on behalf of a client?
- Ensure that the mandate provided by the client:
a. stipulates that the ISP is authorised to invest in foreign investments;
b. contains a statement pertaining to the risks associated with foreign investments, with particular reference to any currency risk;
c. states whether there are any jurisdictional restrictions in respect of the particular foreign investments; and
d. contains full particulars of a manner in which such foreign investments shall be made and in whose name such investments shall be held or registered; and - Confirm that the client has obtained a tax clearance certificate from SARS.
What information must an ISP who manages foreign investments furnish to a client on the client’s request?
- The name of the licensed external exchange on which the foreign investments are listed, if applicable.
- The country in which the foreign investments are licensed or registered and the name and address of the relevant licensing or registration authority, if applicable.
- The name and address of the foreign financial services provider used by the ISP to purchase or hold the foreign investments, if applicable.
- The name and address of the regulator of the foreign financial services provider and whether such foreign financial services provider is approved or registered by such regulator.
In providing advice in respect of JSE authorised investments to a client, other than a professional client, what steps must an ISP take prior to providing such advice?
- Take reasonable steps to obtain information regarding the client’s financial situation, investment experience, and
particular needs and objectives in connection with the services required, to enable the member to provide the client with sound advice. - Conduct an analysis, based on the information obtained, for the purpose of advising the client.
- Identify the JSE authorised investments that will suit the client’s risk profile and financial needs, subject to the terms of any mandate provided to the member by the client.
- Take reasonable steps to ensure that the client understands any advice that has been provided, as well as the nature and material terms and risks involved in the relevant transaction, so as to enable the client to make an informed decision and;
- Ensure that any advice provided is not for the primary purpose of maximising the income of the member.
What must a member do before providing unsolicited advice to a client with the purpose of encouraging or inducing the client to transact in derivative instruments?
- Consider whether such investments are appropriate for the client in relation to the client’s financial situation, investment experience and investment objectives.
- Advise the client, in writing, of the risks associated with trading in derivative instruments.
What must the written arrangement between a member and a controlled client contain regarding instructions relating to corporate actions?
- Whether the client wishes to receive all company reports, proxy forms, notices, circulars, listing particulars and any other issuer communications in respect of equity securities of which such client is a beneficial owner.
- Whether the member is entitled and obliged to utilise its discretion in electing particular options in respect of all or certain corporate action events which require such an election to be made.
- Whether the member may utilise its discretion in exercising voting rights on behalf of the client.
- The means of communication between the member and the client if the member is not granted discretion to act.
This will apply to the communication of the relevant issues to the client by the member as well as the client’s response thereto. - The date and time by which the client is required to make an election, if applicable.
- The option which the member may elect if the client fails to advise the member of their election before the relevant deadline.
Before accepting funds from a client for money broking transactions, what is a member required to obtain from the client?
A written mandate incorporating the conditions published by the registrar of banks or the JSE, subject to the type of money broking transactions to be conducted.
