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FCA Exams > Chapter 2 COBS > Flashcards

Chapter 2 COBS Flashcards

1
Q

What is COBS 2.1? Who does it apply to

A

Act honestly fairly and professionally or clients best interest

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

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2
Q

What is COBS 2.3? Who does it apply to

A

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

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3
Q

Ban inducements if?

A

IDE

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4
Q

IDE?

A

Impair, disclosure, enhance

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5
Q

Is non-MiFID exmept from any of the IDE

A

Non-MiFiD exempt from disclosure and enhance

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6
Q

What type of marketing does FPO relate to.

A

All types

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7
Q

What is S21 of FSMA (FSMA 21).

WHat is the penalty?

A

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

-2 years and or unlimited fine

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8
Q

What does COBS 4 relate to

A

COBS 4 relate to FPO

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9
Q

What are some instruments excluded from the FPO?

A

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

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10
Q

What are some exemptions to the financial promotion rules?

A

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

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11
Q

Can a firm cold call a client?

A

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

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12
Q

What is COBS 4.10

A

Authorised person approving FPO

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13
Q

What is Criteria for large undertakings of MiFID

A

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

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14
Q

What is criteria for non-MiFID if large undertaking

A

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

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15
Q

What is the main difference between ECP and Professional clients?

A

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

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16
Q

What are the ECP businesses?

A

ADREA

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17
Q

ADREA?

A

Arrange, deal, receive, execute, ancillary

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18
Q

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

A

Investment management and advice

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19
Q

How can retail be elected professional?

A

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

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20
Q

What is SYSC10

A

Conflicts of interest

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21
Q

What is COBS 12

A

Relating to investment research and non-independent research

22
Q

What is COBS 11 about?

A

Personal account dealing

23
Q

What kinds of personal account dealing are not applied to?

A

REP

24
Q

What is REP?

A

Robo, ETF, life policies

25
Q

What is COBS 9 and 11

A

COBS 9 = Advising and suitability
COBS 11 = PAD

26
Q

Who does COBS 9 relate to

A

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

27
Q

Who does COBS 9A relate to?

A

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

28
Q

What information to get from client to assess suitability

A

Knowledge, financial situation,objective

29
Q

When is it required to submit suitability report

A

-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

30
Q

What are exceptions to suitability report

A

-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

31
Q

Who can be ECP?

A

Per se professional (except institutional investor) and
Elected professional

32
Q

How should client orders be handled?

A

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

33
Q

What should firm ensure when handling client order

A

promptly and accurately recorded and allocated

34
Q

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

A

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

35
Q

What is considered an exectuion venue

A

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

36
Q

What should company do when there is conflicts of interests

A

Disclose the sources of conflict before any transactions conflict

37
Q

Who is best execution for?

A

Retail and professional

38
Q

Requirement for retail to step up to professional

A

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

39
Q

How can retail step up to be an elective professional?

A

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

40
Q

Can retail be an elective ECP?

A

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

41
Q

Who does COBS apply to?

A

all authorised firms.

However, DIB firms have limited application

42
Q

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

A

Professional

43
Q

What amounts of protection does execution-only client have?

A

None

44
Q

What are the difference between MiFID and non-MiFID businesses

A

MiFID: Core = dealing and managing
MiFID Ancillary = safekeeping, fx servces, investment research

Non-MiFID = insurance undertakings, emplyoee schemes, people administering etc.

45
Q

What are the methods of communication covered by the FPO?

A

Direct offers and cold-calling

46
Q

When does the suitability requirement for Non-MIFID apply?

A

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

47
Q

When does suitability required for MiFID apply?

A

-Investment advice for portfolio
-investment advice for pension

48
Q

To whom is upper tribunal accountable to?

A

Ministry of Justice

49
Q

Who does PAD apply to?

A

Only persons doing DIB

50
Q

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

What about for MiFID business?

A

General media, image advertising, prospectus advertisements, non retail communication

-For MiFID: 3rd paty prospectus

FCA Exams (6 decks)

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