Conduct Of Business And Client Asset Rules Flashcards
COBS applies directly to…
Firms conducting designated investment business from an establishment maintained by them in the UK
According to the FCA, the three types of clients are:
Eligible counterparty
Professional client
Retail client
Professional clients can either be per se or elective. The four types of per se professional clients are:
Authorised/regulated banks
Governments
Institutional investors
Large undertakings
What must a large undertaking satisfy in MiFID business?
Balance sheet €20m
Net turnover €40m
Own funds €2m
What must a large undertaking satisfy in non MiFID business?
Balance sheet €12.5m
Net turnover £25m
Average number of employees: 250
What is the three step procedure for a firm wanting to become a professional elective?
- Written intent from client to be classed as professional
- Written warning to client explaining lost protection
- Written client consent to lost protection
What are the two tests required for Retail to professional clients?
Qualitative - firm to asses expertise, experience and knowledge
Quantitative (MiFID only) - meet two of the following:
Average trading frequency of 10 per quarter for 4 Qs
Portfolio of >€500k
Worked in sector for 1 year
What does S21 FSMA 2000 state?
Must not communicate a financial promotion unless the content has been approved by an authorised person, or the communication is exempt under the financial promotions order
General communication rule of COBs
All communication should be fair, clear, and not misleading
How long is the cancellation period on distance marketing?
14 Calendar days
Cold calls are permitted if:
It’s an existing client who envisages a call
All retails where the promotion relates to:
Generally marketable packaged product
Services relating to readily realisable securities
5 packaged products are:
Life policy Regulated CiS Investment trust saving scheme Stakeholders pension Personal pension
Packaged retail investment and insurance based products (PRIIPS) require what document?
Key investment documents (KIDs)
KIDs must include what 6 things?
- information about the nature and features of the product
- description of risk-reward profile
- description of what happened if the manufacturer is unable to pay
- costs associated with the product
- time restrictions
- complains procedures
What are the tree things to consider when conducting a suitability check?
Do they want it?
Can they afford it?
Do they understand it?
When must a firm provide a suitability report to a retail client?
Where the client:
- Acquired or sells all or part of a holding in a regulated CiS or an investment trust
- Does pretty much anything involving a personal pension scheme
- Elects to make income withdrawals
- Enters into a pension transfer
- In connection connection with a life insurance policy
What is considered to be a non-complex financial instruments?
Shares or bonds
Money market instruments
Units in a UCITS scheme
Under what circumstance is assessing appropriateness not necessary?
For execution only business involving non-complex financial instruments
How often are statements sent out to clients?
At suitable for all customers, and every 6 months for retail clients.
RCs can request more or less frequently
What are the record keeping time constraints for MiFID and non MiFID business, pensions, pension transfers, and client assets?
5 years 3 years 5 years Indefinitely 5 years
What are the rules that include eligible counter parties?
Client categorisation
Conflict of interest rules
Client assets
What rules apply to retail clients only?
Financial promotions
Packaged products and PRIIPs disclosures
Suitability rules
