Conduct Of Business And Client Asset Rules

Question 1

COBS applies directly to…

Answer 1

Firms conducting designated investment business from an establishment maintained by them in the UK

Question 2

According to the FCA, the three types of clients are:

Answer 2

Eligible counterparty
Professional client
Retail client

Question 3

Professional clients can either be per se or elective. The four types of per se professional clients are:

Answer 3

Authorised/regulated banks
Governments
Institutional investors
Large undertakings

Question 4

What must a large undertaking satisfy in MiFID business?

Answer 4

Balance sheet €20m
Net turnover €40m
Own funds €2m

Question 5

What must a large undertaking satisfy in non MiFID business?

Answer 5

Balance sheet €12.5m
Net turnover £25m
Average number of employees: 250

Question 6

What is the three step procedure for a firm wanting to become a professional elective?

Answer 6

1. Written intent from client to be classed as professional
2. Written warning to client explaining lost protection
3. Written client consent to lost protection

Question 7

What are the two tests required for Retail to professional clients?

Answer 7

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

Question 8

What does S21 FSMA 2000 state?

Answer 8

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

Question 9

General communication rule of COBs

Answer 9

All communication should be fair, clear, and not misleading

Question 10

How long is the cancellation period on distance marketing?

Answer 10

14 Calendar days

Question 11

Cold calls are permitted if:

Answer 11

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

Question 12

5 packaged products are:

Answer 12

Life policy
Regulated CiS
Investment trust saving scheme 
Stakeholders pension
Personal pension

Question 13

Packaged retail investment and insurance based products (PRIIPS) require what document?

Answer 13

Key investment documents (KIDs)

Question 14

KIDs must include what 6 things?

Answer 14

• 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

Question 15

What are the tree things to consider when conducting a suitability check?

Answer 15

Do they want it?
Can they afford it?
Do they understand it?

Question 16

When must a firm provide a suitability report to a retail client?

Answer 16

Where the client:

1. Acquired or sells all or part of a holding in a regulated CiS or an investment trust
2. Does pretty much anything involving a personal pension scheme
3. Elects to make income withdrawals
4. Enters into a pension transfer
5. In connection connection with a life insurance policy

Question 17

What is considered to be a non-complex financial instruments?

Answer 17

Shares or bonds
Money market instruments
Units in a UCITS scheme

Question 18

Under what circumstance is assessing appropriateness not necessary?

Answer 18

For execution only business involving non-complex financial instruments

Question 19

How often are statements sent out to clients?

Answer 19

At suitable for all customers, and every 6 months for retail clients.
RCs can request more or less frequently

Question 20

What are the record keeping time constraints for MiFID and non MiFID business, pensions, pension transfers, and client assets?

Answer 20

5 years
3 years
5 years
Indefinitely 
5 years

Question 21

What are the rules that include eligible counter parties?

Answer 21

Client categorisation
Conflict of interest rules
Client assets

Question 22

What rules apply to retail clients only?

Answer 22

Financial promotions
Packaged products and PRIIPs disclosures
Suitability rules