MiFID

Question 1

MiFID main areas covered

Answer 1

1) Conduct-of-business requirements for investment services providers
2) Organizational requirements
3) Transaction reporting
4) Transparency requirements for trading
5) Enhancement of passport (right of certain FIs licenced in one member state to provide services elsewhere without addtl. requirements)

Question 2

Scope

Answer 2

1) investment firms and regulated markets
2) CIs authorised when providin g one or more investment services/activities
3) trading venues

Question 3

Definition investment firm, investment advice, portfolio management

Answer 3

1) legal person that provides investment services or performs invesment activities on a professional basis
2) personal recommendations to a client in respect to transactions relating to financial instruments
3) managing porfolios in accordance with mandates given by clients on a discretionary client-by-client basis where ptf include financial instruments

Question 4

Definition systematic internaliser

Answer 4

investment firm hat deals on own account by executing clients orders outside a regulated market, an MTF or an OTF without a multilateral system

Question 5

Classification of clients

Answer 5

1) Retail: anyone who is not a professional client (highest level of protection)
2) proessional clients (defined as client who has experience and knowledge to make own investment decisions)
3) eligible counterparties: sub type of pros (investment firms, credit institutions, insurance companies, UCITS, pension funds,…)

more expeirnce -> more freedom in conduct-of-business rules

Question 6

Suitability vs. Appropriateness tests

Answer 6

Suitability: when providing investment advice/ptf mgmt. Test 1) knowledge and experience 2) financial situation 3) invesetment objectives incl. risk tolerance

Appropriateness: when providing OTHER investment services. Test ONLY knowledge and experience (familiarity with which transactions, nature/volume/frequency, education/profession). NO reference to financial situation and investment objectives.

Both are owed to retail AND profesionals.

Question 7

Suitability test for robo advisors

Answer 7

responsibility lies with investment firm providing the service and shall not be reduced by the used of an electronic system

Question 8

Suitability vs. appropriateness, consequences of negative assessment

Answer 8

Suitability: Prevented from performing services
Appropriateness: only warning to client, but service can still be provided

Question 9

Principles for executing orders for client

Answer 9

IFs take all steps to obtain best result for client regarding price, cost, speed, likelihood of execution and settlement, size,..