Chapter 2 COBS

Question 1

What is COBS 2.1? Who does it apply to

Answer 1

Act honestly fairly and professionally or clients best interest

MiFID business on retail and professional
Non-MiFID: retail only

Question 2

What is COBS 2.3? Who does it apply to

Answer 2

Inducement. MiFID and non-MiFID on retail and professional only

Question 3

Ban inducements if?

Answer 3

IDE

Question 4

IDE?

Answer 4

Impair, disclosure, enhance

Question 5

Is non-MiFID exmept from any of the IDE

Answer 5

Non-MiFiD exempt from disclosure and enhance

Question 6

What type of marketing does FPO relate to.

Answer 6

All types

Question 7

What is S21 of FSMA (FSMA 21).

WHat is the penalty?

Answer 7

Offence to issue financial promotion unless issued or approved by authorised firm

-2 years and or unlimited fine

Question 8

What does COBS 4 relate to

Answer 8

COBS 4 relate to FPO

Question 9

What are some instruments excluded from the FPO?

Answer 9

home purchase plans,
non-investment insurance contracts, unregulated CIS
credit agreements

Question 10

What are some exemptions to the financial promotion rules?

Answer 10

Communication with journalist government,

prospectus and supplementary prospectuses approved by FCA,

promotions made to HNWI and investment professionals etc.

Prospectus passported into the UK by EEA

Question 11

Can a firm cold call a client?

Answer 11

No unless:
-existing relationship
-relates to generally marketable product (not a life policy linked to a fund)
-relates to a controlled activity relating to a limited range of investments

Question 12

What is COBS 4.10

Answer 12

Authorised person approving FPO

Question 13

What is Criteria for large undertakings of MiFID

Answer 13

20 BS, Revenue 40, own funds 2 -> all euros

Question 14

What is criteria for non-MiFID if large undertaking

Answer 14

-Called up share capital 5mil pounds
-BS 12.5, Revenue 25, or 250 employees
Trustee of pension scheme with 50 members and 10 mil

Question 15

What is the main difference between ECP and Professional clients?

Answer 15

ECP cannot include large undertakings and can only provide 5 types of business

Question 16

What are the ECP businesses?

Answer 16

ADREA

Question 17

ADREA?

Answer 17

Arrange, deal, receive, execute, ancillary

Question 18

What are some services not included to be ECP (meaning that if firms provide these, they become professional)

Answer 18

Investment management and advice

Question 19

How can retail be elected professional?

Answer 19

-firm assess expertise
-Quantitative test: portfolio >500,000 and 10 transactions past 4 quarters

Question 20

What is SYSC10

Answer 20

Conflicts of interest

Question 21

What is COBS 12

Answer 21

Relating to investment research and non-independent research

Question 22

What is COBS 11 about?

Answer 22

Personal account dealing

Question 23

What kinds of personal account dealing are not applied to?

Answer 23

REP

Question 24

What is REP?

Answer 24

Robo, ETF, life policies

Question 25

What is COBS 9 and 11

Answer 25

COBS 9 = Advising and suitability COBS 11 = PAD

Question 26

Who does COBS 9 relate to

Answer 26

COBS 9 only relate to non-MiFID firms and only RETAIL CLIENTS -relate to recommendation, management of investments to retail clients, manage assets of pension schemes

Question 27

Who does COBS 9A relate to?

Answer 27

MiFID firm: -advice and portfolio managemnet -advice to insurance-based investment product

Question 28

What information to get from client to assess suitability

Answer 28

Knowledge, financial situation,objective

Question 29

When is it required to submit suitability report

Answer 29

-When Non-MiFID makes a personal recommendation to a client -When it relates to life assurance policy -acquire any insurance related for non-MiFID -When MiFID provides investment advice to retail clients

Question 30

What are exceptions to suitability report

Answer 30

-regulated CIS -if client lives outside UK =reommendation is to increase premium of existing contract invest additional single premium or single contribution to existing packed product

Question 31

Who can be ECP?

Answer 31

Per se professional (except institutional investor) and Elected professional

Question 32

How should client orders be handled?

Answer 32

Allow comparable client orders to be executed in the order in which they are received

Question 33

What should firm ensure when handling client order

Answer 33

promptly and accurately recorded and allocated

Question 34

Who should company do when there are difficulty in executing the order

Answer 34

**Retail clients** need to be informed of any material difficulty, **immediately**

Question 35

What is considered an exectuion venue

Answer 35

Liquidity provider, e.g. MTF, market maker etc.

Question 36

What should company do when there is conflicts of interests

Answer 36

Disclose the sources of conflict before any transactions conflict

Question 37

Who is best execution for?

Answer 37

Retail and professional

Question 38

Requirement for retail to step up to professional

Answer 38

10m portfolio, 10 big trades/quarter in past 4 quarters, the person worked or has worked in financial sector, local pension scheme

Question 39

How can retail step up to be an elective professional?

Answer 39

Non-MiFID -> Qualitative test MiFID -> QUantitative test + qualitative

Question 40

Can retail be an elective ECP?

Answer 40

No. Only large undertakings can opt up from professional to ECP

Question 41

Who does COBS apply to?

Answer 41

all authorised firms. However, DIB firms have limited application

Question 42

What kind of clients are a CIS, insurance companies, pension funds

Answer 42

Professional

Question 43

What amounts of protection does execution-only client have?

Answer 43

None

Question 44

What are the difference between MiFID and non-MiFID businesses

Answer 44

MiFID: Core = dealing and managing MiFID Ancillary = safekeeping, fx servces, investment research Non-MiFID = insurance undertakings, emplyoee schemes, people administering etc.

Question 45

What are the methods of communication covered by the FPO?

Answer 45

Direct offers and cold-calling

Question 46

When does the suitability requirement for Non-MIFID apply?

Answer 46

-personal recommendation for investment to retail -managing investment -managing assets and stakeholder pension

Question 47

When does suitability required for MiFID apply?

Answer 47

-Investment advice for portfolio -investment advice for pension

Question 48

To whom is upper tribunal accountable to?

Answer 48

Ministry of Justice

Question 49

Who does PAD apply to?

Answer 49

Only persons doing DIB

Question 50

For non-MiFID businesses, what are not financial promotions? (means they are EXCLUDED) What about for MiFID business?

Answer 50

General media, image advertising, prospectus advertisements, non retail communication -For MiFID: 3rd paty prospectus