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Flashcards in Chapter 2 Deck (12):

Personal account dealings: all clients (including eligible counterparties)

arrangements to prevent inappropriate dealings which are
-prohibited by the MAR
-involve misuse or disclosure of confidential client information
-conflict with the firm's obligations to the client

Compliance with and exceptions to the rules:
-relevant persons are aware of restrictions
-relevant persons inform te firm
-firm records all notification
-funds managed independently (discretionary)
-shares in a UCIS schemes
-life policies


Advising and dealing (suitability and best execution)

Suitability rules apply when firms:
-make personal recommendations relating to designated investments
-manage investments


The requirement to assess suitability

The firm should obtain the information regarding client's:
knowledge and experience in the investment field relevant to the specific type of designated investment business
financial situation
investment objectives

to enable to make recommendations which are suitable for the client


Best execution

requires firms to execute orders on the terms that are the most favorable to the client
the firms must take all reasonable steps to obtain, when executing orders, the best possible result for their clients, taking into account the execution factors
execution factors are: price, costs, speed, likelihood of execution and settlement, size etc
it applies to all types of financial instruments


Activities subject to COBS

-accepting deposits
-long term insurance in relation to life policies
-activities related to these


Financial Promotion rules

S 21 FSMA makes it an offence to issue a financial promotion, unless issues by an approved or authorised firm
COBS 4 provides the financial promotions rules, which include standards and restrictions which relate to the financial promotions themselves
The financial promotions rules apply to firms communicating to firms regarding theit designated investment business and approving and communicating promotion other than:
-qualifying credit, home purchase
-promotion of non-investment insurance contract (motor insurance)
-promotion of unregulated collective investment scheme (CIS)
The majority of these rules do not apply when the client is an EC, although priciple 7 still applies.


Financial promotions rules are consistent with principles 6 and 7 of the FCA's principles for business

Principle 6: a firm must pat due regard to the instruments of customers and treat them fairly
Principle 7: a firm must pay due regard to the information needs of the clients and communicate them in ways that are clear, fair and not misleading


Requirements for financial promotions: communicating with retail clients

what needs to be included:
-firm's name
information is accurate
-does not disguise, diminish

These rules are disapplief for third party prospectuses and image advertising


Overseas persons

-firms are not permitted to communicate or approve financial promotion for overseas persons unless it is explained that:
*the rules of the investors protection do not apply
*the extent to which UK compensation scheme arrangements will be available
-if the communicator wishes to do so, the details of any overeseas compensation and protection available


ECP categorisation

a client can only be categorised as an ECP for the following five types of business:
executing orders
dealing on own account
receiving and transmitting orders
-ancillary services

Many of the COBS rules DO NOT APPLY when the client as an ECP


In relation to non-MiFID business, firms need only follow suitability criteria when dealing for:

making personal recommendations to retail clients ad firms managing occupational, stakeholder, personal and pension schemes.
for mifid customers, it would relate to all clients.


When would a financial promotion need to follow the rules on fair, clear and not misleading communications?

Even when a firm are not communicating a promotion themselves, they need to follow the rules if the are approving it.