Chapter 4

Question 1

COBS

Answer 1

1. Business Standards block of the FCA Handbook.
2. 1 Nov. ‘07.
3. focus on outcomes rather than compliance with prescriptive rules.
4. Implemented MiFID.
5. Contains provisions for investment firms that are not subject to MiFID and those that are

Question 2

MiFID

Answer 2

set standards for business conduct without prescribing how firms achieve them.

Question 3

COBS application rule

Answer 3

1. UK firms conducting MiFID business for UK clients

2. UK firms established in EEA state, conducting MiFID investment outside states territory.

Question 4

EEA Territorial Scope Rule

Answer 4

overrides COBS geographic rule when it is necessary to be compatible with EU law. (for companies with cross-border elements can use passporting rights).

Question 5

What firms are subject to the FCA Conduct of Business Sourcebook?

Answer 5

[find answer]

Question 6

What’s the impact of location on firms/activities of the application of the FCA Conduct of Business Sourcebook?

Answer 6

[find answer]

Question 7

Which activities are subject to the FCA Conduct of Busiiness Sourcebook?

Answer 7

• designated investment business
• long-term insurance business in relation to life policies
• accepting deposits

Question 8

Disapplied COBS rules

Answer 8

• for firms carrying on eligible counterparty business
  • A large part of COBS 2 – general conduct of business obligations.
  • Much of COBS 4 – communicating with clients (including financial promotions).
  • COBS 6.1 – provision of information about the firm, its services and its remuneration.
  • COBS 8 – client agreements.
  • COBS 10 – appropriateness (for non-advised services).
  • Certain parts of COBS 11 – best execution and client order handling.
  • Parts of COBS 12 – labelling of non-independent research.
  • COBS 14.3 – information relating to designated investments.

Question 9

Regulated Market Members COBS compliance

Answer 9

do not have to comply with COBS 11.4 (Client limit orders) but must compley when they are executing orders on a client’s behalf.

Question 10

How does the application of the FCA CBS apply to appointed representatives?

Answer 10

• appointed representatives are exempt, can carry out regulated activities under umbrella of firm.
• must comply when communicating financial promotions.

Question 11

Financial promotion communicated by appointed representive

Answer 11

exempt promotions and doesn’t need approval. Firms are repsonbile for content of financial promotions communicated by their appointed representatives.

Question 12

What are the provisions of the FCA CBS regarding electronic media?

Answer 12

[find answer]

Question 13

Website Conditions, FCA requirements

Answer 13

if info on website: evidence that client has regualr access to internet (ex: email)

• consent of client providing email
• electronic notification of website address and access to information
• updated information
• accessible

Question 14

Recording of voice and electronic communications

Answer 14

• recording and retaining telephone & electronic communications linkedd to client orders, financial instruments for 6 months.
• activities carrioued of from establishment maintined by the firm in the UK

Question 15

Electronic Communication & phone conversations

Answer 15

fax
email 
instant messaging 
firm telephony
business phones
NOT PERSONAL PHONES

Question 16

Recording rules apply to firms carrying out what activities?

Answer 16

• receiving client orders
  executing client orders
  arranging for client orders to be executed
• carrying out transactions on behalf of firm, •executing orders which result from decisions by the firm to deal on behalf of its client
  • placing orders with other entities for execution that result from decisions by the firm to deal on
  behalf of its client.

Question 17

Acitivies for electronic and phone recording apply to

Answer 17

• financial instruments admitted to trading on a trading venue (regulated market, multilateral trading facility (MTF) or an organised trading facility (OTF))
• financial instruments in respect of which a request for admission to trading on a trading venue has been made, and
• investments which are related to such financial instruments.

Question 18

The E&T recording rules don’t apply to?

Answer 18

• activities carried out between operators, or between operators and depositaries, of the same CIS
• corporate finance business
• corporate treasury functions.

Question 19

E&T recording communications are?

Answer 19

• Between an employee or contractor of the firm with a client, or when acting on behalf of a client, with another person, which concludes an agreement by the firm to carry out the activities referred to above, as principal or as agent.
• Between an employee or contractor of the firm with a professional or an eligible counterparty, or, when acting on behalf of a professional client or an eligible counterparty, with another person, which is carried on with a view to the conclusion of an agreement referred to above, and whether or not it is part of the same conversation or communication.
The rules do not include conversations or communications made by investment analysts, retail financial advisers or persons carrying on back office functions, nor to general conversations or communications about market conditions.