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Chapter 4 - COBS and CASS > Inclusions and Exclusions > Flashcards

Inclusions and Exclusions Flashcards

1
Q

Which firms are subject to COBS - General Application Rule?

A
  • Firms and their ARs in the UK

- Overseas firms in the UK

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2
Q

Which firms are subject to the COBS - EEA Territorial Scope Rule?

A
  • UK firms conducting MiFID business in the UK for UK clients.
  • EEA branches of UK firms doing MiFID business outside that state’s territory
  • EEA firms with a UK branch
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3
Q

What are the exceptions to the EEA Territorial Scope Rule?

A
  • Investment Research
  • Personal Account Dealing
  • Appointed Representatives - Firms is principal and responsible.

Rules apply on home state basis only. UK firms are subject to COBS but EEA firms are not.

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4
Q

Which activities are captured by COBS rules?

A
  • Designated investment business
  • Life insurance
  • Financial Promotions - Accepting Deposits
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5
Q

Under COBS which clients are captured as professional clients?

A
  • Credit institution (bank)
  • Investment Firm
  • Commodities Dealing
  • Local
  • Pension Fund
  • Institutional Investor
  • CIS
  • Insurance Company
  • Large MiFID undertaking
  • Large non-MiFID undertaking
  • Governments and public bodies
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6
Q

Under COBS which clients are captured as ECP clients?

A

All firms that professional clients

CIS under UCITS Directive

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7
Q

Which activities can be classified under an ECP client?

A
  • Executing client orders
  • Receiving and transmitting client orders
  • Ancillary services
  • Arranging
  • Dealing on own account
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8
Q

Which firms are required by COBS to produce a client agreement?

A
  • Designated investment business - retail clients
  • MiFID business
  • Ancillary or third country business - retail and professional
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9
Q

Which firm(s) are exempt from COBS requirements to produce a client agreement?

A

Life insurance company

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10
Q

Which types of firms need to provide information about the nature and risks of an investment?

A
  • MiFID or equivalent third country business - retail and professional
  • Non-MiFID business - retail clients - derivatives, warrants or stock lending activity.
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11
Q

Which firms need to provide information about the firm?

A
  • Retail, professional and ECP clients
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12
Q

To which types of clients must a firm provide information about managing investments?

A
  • Retail clients
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13
Q

To which types of clients must a firm provide information about the safe custody of assets and money?

A
  • Retail, professional and ECP clients
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14
Q

To which types of clients must a firm provide information about the costs?

A
  • Retail, professional and ECP clients
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15
Q

Which types of firms need to provide information about the compensation schemes available?

A
  • MiFID firms
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16
Q

To which type of sales does the Retail Distribution Review brings rules about advisor charging?

A
  • Advised sales - retail products
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17
Q

Which types of sales are exempt from RDR rules on advisor charging?

A
  • Non advised business - execution only and discretionary management of investments
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18
Q

Which type of business does COBS make provisions for relying on other firms for information?

A
  • MiFID business receiving instruction to provide investment or ancillary services through another MiFID firm.
19
Q

What does the FCA state should be the approach for non-MiFID firms when relying on information from others in relation to investments?

A
  • Reasonable for firms to rely on information provided by an unconnected authorised person or firm unless it is aware of anything that would question the accuracy of the information.
20
Q

To which type of firm do the rules on Financial Promotions apply to?

A
  • MiFID businesses communicating financial promotions.
21
Q

Which types of firms are exempt from the rules on financial promotions?

A
  • Firms with a Financial Promotion Order for HM Treasury.
  • Overseas firms communicating with non-UK clients.
  • EEA firms communicating with UK clients.
  • ECPs
  • Promotions subject to the Takeover Code
  • One-off promotions (not cold calls)
  • Personal quotes or illustration forms
  • Unregulated CIS (Promotion of CIS (Exemptions Order) 2001)
  • Credit, a home purchase plan or a home reversion plan.
  • Promotion for a non-investment insurance contract
22
Q

Which firms are subject to the prospectus rules?

A
  • Firms which offer admission to the trading of transferable securities where a prospectus is required under Section 85 FSMA.
  • Where an election to produce a prospectus has been made under Section 87 FMSA.
23
Q

Which types of promotions are subject to the rules on direct offer promotions?

A
  • Direct offer promotions in newspapers, trade magazines, TV, direct mail - retail clients
24
Q

Which types of firms can rely on promotions approved by another party?

A
  • Non-MiFID business - not in breach of rules if communicating a promotion produced by a third party.
25
Q

Which types of activities are subject to the Suitability Rules?

A
  • Personal recommendations
  • Managing investments of a retail client
  • Manage the assets of a personal or stakeholder or occupational pension scheme.
26
Q

Which types of firms need to produce suitability report?

A
  • MiFID - retail and professional clients
27
Q

For which types of activities/instruments must a suitability report be produced?

A

Personal recommendation to trade in the following:

  • Equities
  • Derivatives
  • Structured Products
  • Unregulated CIS
  • Regulated CIS (pre-MiFID product)
  • Investment (if shares in trust savings scheme)
  • Stocks and Shares ISA - (pre-MiFID product)
  • Personal Pension or Stakeholder Pension
  • Income withdrawals or contributions to an annuity.
  • Entering into pension transfers or opt-outs
  • Life insurance policy (non-MiFID)
28
Q

Which firms/investments are exempt from producing a suitability report?

A
  • Regulated CIS if acting on a discretionary management basis (retail client)
  • Habitually outside the UK
  • A friendly society in connection with a small life policy with premiums less than £1 a week of £50 for a year.
  • Personal recommendation to increase premium contributions to an existing life insurance contract.
  • To add single contributions to an existing packaged product.
29
Q

Which types of activities would the appropriateness rules apply to?

A
  • Non advised sales
  • MiFID firms providing investment advice
  • Arranging deals or dealing in warrants and derivatives for retail clients where the firm is aware that the client’s application is in response to a direct offer promotion.
  • Assessing the appropriateness on behalf of other MiFID firms.
30
Q

Which types of activities are exempt from the appropriateness rules?

A
  • Service is execution only
  • Receipt or transmission of orders
  • Shares on a regulated market
  • Money market instruments, bonds and other forms of securitised debt
  • UCITS funds
  • Non-complex investments
31
Q

Which types of firms need to produce a Key Investor Information Document (KIID)?

A
  • Authorised Fund Manager

- UCITS

32
Q

When would a firm not have to produce a KIID?

A
  • Another firm has agreed to produce a KIID.
  • Information in a KIID is featured in another document
  • Reinsurance and pure protection insurance contracts.
33
Q

Which types of products require a Key Features Document (KFD)?

A
  • Child Trust Funds
  • Cash Deposit ISAs
  • Packaged Products
34
Q

Which types of firms are subject to COBS rules on PRIIPS?

A
  • Retail clients (MiFID) and customers referred to in the Insurance Mediation Directive.
  • Retail investment companies
  • Life companies
  • Discretionary investment management companies
  • Insurance based investments
  • Fund managers
  • Stockbrokers - retail clients
  • Financial advisers
  • Firms operating retail distribution platforms
35
Q

Who are subject to SYSC rules on conflict of interest?

A
  • Producers of investment research
36
Q

When would a firm not be subject to SYSC rules on conflict of interest?

A
  • Persons not in the same group as the firm
  • The firm does not substantially change the investment research.
  • The firm does not hold itself out as produced the investment research.
  • The firm verifies that the producer of the investment research has a conflict of interest policy.
37
Q

Which types of firms and clients are subject to the COBS rules on inducements?

A
  • MiFID and non-MiFID firms

- Retail and Professional clients

38
Q

Who would need to set up a Research Payments Account?

A

Producers of research

39
Q

What would not count as research?

A
  • Post trade analytics
  • Data on historic prices that have not be analysed
  • Seminar fees
  • Order and execution services
  • Administration of an RPA
40
Q

To who do the rules on best execution apply to?

A
  • Authorised Fund Managers (AFMs) (COBS)
  • Residual CIS (COBS)
  • MiFID investment services (MiFID)
  • UCITS management companies (MiFID)
41
Q

Which types of clients/firms are subject to COBS 6 - Safe custody rules?

A
  • Firms safeguarding client assets for retail, professional and ECP clients.
  • Firms holding financial instruments for MiFID business
  • Firms safeguarding and administering investments for non-MiFID business.
42
Q

Which types of clients/firms are subject to COBS 7 - Client money rules

A
  • Retail, professional and ECP clients
  • Holding client money - MiFID business
  • Firms opting to client money rules under MiFID despite being non-MiFID.
43
Q

Which firms are exempt from COBS rules on safe custody of assets and client money rules?

A
  • ICVs
  • Incoming EEA firms
  • Credit institutions (e.g. bank) under the Banking Consolidation Directive (BCD)
  • Coins held for their metal value
  • Money held in connection with a DvP transaction
  • Money payable to the firm
  • Business carried out by the firm on behalf of the client in order to achieve best executions
  • Client transfers of money and assets to the firm

Chapter 4 - COBS and CASS (8 decks)

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