Regulation Chapter 4 Flashcards
Application of COBS:
Firms are subject to COBS if….
they carry on the following activities from an establishment maintained by them (or representative) in the UK.
the activities:
- designated investment business (subset of specified investment list. Note: in this is both MiFID (most important) and non-MiFID business)
- accepting deposits
- long-term life insurance business (non-MiFID)
appointed representatives: (tied agents) (indirectly affected by COBS)
- firm’s responsibility
- indirect application (Firm is directly affected by COBS, representatives are indirectly affected.)
Electronic Media:
- Durable Medium &
- Website requirements
DURABLE MEDIUM: (kind of like evidence/hard proof)
- paper
- an instrument that enables the recipient to store information in a way accessible for future reference
when communications are allowed on a website, FCA requires that: WEBSITE CONDITIONS to be met:
- information must be appropriate
- client must specifically consent
- cleint must be notified by email of web address and where to access information
- information must be up-to-date
- information must be continuously available
Recording of Telephone Conversations and Electronic Communications
under what rules?
applicable what situation?
How long do you hold onto records? (likely question)
- under SYSC 10A telephone conversations and electronic communications must be recorded
- application: receiving/executing/arranging client orders
- keep records: 5 years under MiFID II
Client Categorisation overview
If a Retail Client wants to Opt Up to Elective Professional Client the have to…..
- Qualitative test (FOR ALL BUSINESS, MiFID and NON-MiFID)
assess expertise, experience, and knowledge.
- Quantitative test at least 2 of the following: (ONLY FOR MiFID BUSINESS)
- at least 10 transactions per quarter on the relevant market over the last four quarters
- client’s portfolio exceeds e500,000
- at least one year’s professional work in financial sector
- 3 way communication
- client says in writing they want to be treated as profesh cl
- firm gives written warnings of protections lost
- cleitn must state (seperately) in writing that they are aware of the consequences
Per Se Professional Client
Per Se Eligible Counterparties
Elective Eligible Counterparties
Who can opt down?
per se eligible counterparies to professional client or retail. and a per say professional to retail.
You need an agreement when conducting designated buysiness with a …… for MiFID business and ……… for Non-MiFID business.
retail and professional client
retail client
Client Agreement
- need one for retail and professional clients if MiFID business, and only for retail clients if Non-MiFID business.
- must be in durable medium form (can just be one-way communication)
- needs to be made before provision of services
- keep records for 5 years (MiFID), 3 years (Non-MiFID), or duration of relationship plus the 5 or 3 years.
Information Requirements
purpose &
the information firms must provide clients
Purpose:
- understand the nature and risk of investmetns/services
- make decisions on an informed basis
Firsm must provide clients info on:
- the firm and its services
- designated investments and proposed investment strategies (including risks)
- execution venues
- costs and charges
It is an offence under FSMA to communicate a financail promotion, unless…..
- you are an authorised firm
- the financial promotion has been approved by an authorised firm
Purpose of financial promotion rules.
- promotions are clearly identified as such
- they are fair, clear, and not misleading
The financial promotion rules are consistent with….
principle 6 & principle 7 of principles for business (Ch1)
6: customers’ interests (treat fairly!)
7: communication with clients (info is clear etc.)
What is a prospectus?
What is a promotion?
prospectus: gives a lot of detail
promotion: more like pamphlet (tells you where to get prospectus etc.)