Cards from End of Chapter Questions Flashcards
(14 cards)
2 - When do COBS rules apply?
COBS rules apply to firms:
- Accepting deposits (certain rules only)
- Conducting DIB
- Long-term life insurance business
(N.B. some COBS rules are modified/disapplied when working with eligible counterparties)
2 - What are the rules on inducements?
Inducements must:
- Not impair the firm from acting in its client’s best interests
- Be designed to improve the quality of client service
- Be clearly disclosed
2 - What COBS information and reporting requirements were extended to Eligible Counterparties?
i. Acting honestly, fairly, and professionally
ii. Communicating in a way that is fair, clear, and not misleading
iii. Provide certain information and reports to ECPs
2 - What is the purpose of the FCA’s Corporate Finance Specialist Regime?
To ensure fair treatment of CF firms that are/aren’t carrying out MiFID business w.r.t. COBS. The COBS rules and provisions that do not apply include:
i. Advisor charging and renumeration
ii. Breadth of advice for investments
iii. Disclosure of charges, renumeration, and commission
iv. Suitability reports (though COBS 9.2A “Assessing Suitability” still applies)
N.B. Conversely, for non-MiFID firms carrying out CF business the FCA provides a table of the rules and provisions that apply
2 - What is a corporate finance contact?
Generally not a client, as no service is usually provided to a corporate finance contact. However, w.r.t. financial promotion rules the contact shall be considered a client
2 - What are the main conflicts of interest that will arise for a corporate finance firm?
i. Financial gain (or avoidance of loss) at the expense of the client
ii. Interest in the outcome that is not in the interest of the client (e.g. a non-compliant inducement)
iii. Interest in favouring the outcome of another client(s) over the interests of the current client
iv. Carries on the same business as the client
2 - What methods exist to managing conflicts of interest in a firm?
i. Information barriers
ii. Remuneration structures
iii. Segregation of duties
iv. Policy of independence
2 - What is the purpose of the Personal Account Dealing Rules?
To prevent indiscretion related to:
i. Conflicts of interest
ii. Mistreatment of inside information (as defined by UK MAR)
iii. Mistreatment of other client confidential information
2 - When are non-MiFID firms required to make a suitability assessment report in relation to a personal recommendation?
When the client is:
i. Acquiring/Selling a Collective Investment Scheme (CIS), Investment Trust Savings Scheme (ITSS), or Investment Trust within an ISA
ii. Acquiring/Selling/Surrendering/Converting rights to, or suspends contributions to, a personal or stakeholder pension scheme
iii. Elects to make Income Withdrawals or Purchases Annuity
iV. Enters a Pension Transfer or Opt-Out
2 - When are MiFID firms required to make a suitability assessment report in relation to a personal recommendation?
MiFID firms must provide a report to the retail client when providing investment advice, unless:
i. When a firm is acting as an investment manager for a retail client and makes a personal recommendation w.r.t. a regulated CIS
ii. When the client is currently and habitually outside f the UK
iii. When the personal recommendation is to make a one-off, or increase a regular, contribution to an existing contract
2 - How should firms ensure that clients are treated fairly to comply with the Client Order Handling Requirements?
i. Executions are prompt, accurately allocated and recorded
ii. Comparable executions are made sequentially in the order in which they’re received from clients
iii. Retail clients are quickly informed of any material difficulty in the prompt execution of their order
iv. When overseeing or arranging settlement, the assets/money are delivered promptly and correctly
2 - What is the Four-Fold test elements to assess the level of reliance a client places on a firm?
i. The client initiated the transaction
ii. The client shopped for quotes
iii. The client is not able to identify price transparency in the market
iv. (whether) All the information provided and any agreement reached
1 - What are the Cross-Cutting Rules of the Consumer Duty?
- Act in good faith towards retail customers
- Avoid foreseeable harm to retail customers
- Enable and support retail customers to pursue their financial objectives
1 - What are the Good Outcomes the FCA expects to see in the Consumer Duty?
- Products & Service are designed to fit the group
- Price & Value is fair for customers in the target market/group
- Consumer Understanding is enabled by fair, clear, and not misleading communication
- Consumer Support is provided to meet customer needs throughout the relationship
