Chapter 4 - COBS and CASS Focused Deck Flashcards
(98 cards)
What are the exceptions to the EEA Territorial Scope Rule?
- Personal Account Dealing
- Financial Promotions
Which activity is exempt from COBS?
- When firms execute client limit orders in respect of each other. (ECPs)
Which activities are subject to COBS?
- Designated Investment Business
- Life Insurance
- Accepting Deposits - Financial Promotions
What does COBS consider a durable medium?
- Paper
- Storage + Retrieval e.g. PC
- Website if conditions are met
Which activities are covered by COBS for ECP clients?
- Personal account dealing
- Execution only
- Receiving and transmitting orders
- Arranging
- Ancillary Services
For MiFID large undertakings - Professional client, what are the requirements?
Any two of the following:
- Net turnover = €40 million
- Balance Sheet = €20 million
- Firm’s own funds = €2 million
For non-MiFID large undertakings - Professional clients, what are the requirments?
Net share capital/assets = £5 million in the last 2 years.
Partnership or unincorporated association with net assets of = £5 million in the last 2 years.
Trustee of a trust = £10 million under management
Pension Fund = £10 million under management and at least 50 members.
Any two of the following
- Net turnover = €25 million
- Balance Sheet = €12.5 million
- Average annual employees = 250
Under MiFID which test(s) must be conducted when recategorising a client as an elective professional client?
Qualitative
- Knowledge and expertise
Quantitative:
- average of 10 significant sized transaction in each of the past 4 quarters.
- Portfolio of at least €500,000
- Worked in financial services for at least 1 year
For non-MiFID firms which test(s) must be conducted when recategorising a client as an elective professional client?
Qualitative
- Knowledge and expertise
For an elective ECP which test(s) must be conducted for recategorisation?
Qualitative:
- Knowledge and expertise
Quantitative if client is a local authority and:
- Has a portfolio of at least £10 million
and
- has conducted an average of 10 significant sized transactions in each of the past 4 quarters.
- is acting as the ‘administering authority’ of the Local Government Pension scheme
- has at least 1 year experience in the relevant bit of financial services.
- local authority is an EEA state and has additional criteria.
Which firm(s) need to provide Client Agreements?
- Designated investment business - retail clients
- Ancillary MiFID business or third country business - professional and retail clients
Which firm(s) don’t need to provide a Client Agreement?
- Life insurance company acting as principal
What is the record retention policy for client agreements?
Longest of:
- 5 years
- Duration of client relationship
- Indefinitely if pension transfer, opt-out or FSVCs.
Which types of firms are exempt from the COBS rules on communicating with clients?
- FPO - HM Treasury
- unreg CIS
- Subject to Takeover Code
- Home reversion/purchase plan
- non investment insurance contract
- Personal quotes and illustration forms
- One-off promotions (not cold calls)
- Credit
When doesn’t the disclosure that an advert is a financial promotion need to be made?
- In relation to professional and ECP clients
When does the rules on communicating with retail clients get disapplied?
- Prospectus produced by 3rd party
- Excluded comms for non-MiFID business
What does the FCA recommend creators of financial promotions consult when making the promotions?
Code of Conduct for the Advertising of Interest Bearing Accounts
Which 4 products cannot be marketed through cold calling?
- High volatility fund
- Life policy linked to a high volatility fund
- Packaged non-geared products
- Warrants
For which types of promotions are authorised firms restricted from approving?
- Real-time promotions
- Unregulated CIS unless able to legitimately promote it themselves.
If certain rules are disapplied for a financial promotion, what must a firm do with regards to the promotion?
- The firm must include a statement in the promotion stating that the rules have been disapplied - e.g. in respect of a professional or ECP client.
Which activities do the rules on suitability apply to?
- Personal recommendations
- Manage investments
- Manage a personal, stakeholder or occupational pension (except under MiFID)
For which type of client would a firm need to produce a suitability report for?
Retail client
Which types of instruments need a suitability report prepared post the introduction of the MiFID regime?
- Equities
- Derivatives
- Life insurance policy
- Structured products
- Unregulated CIS
Which types of instruments need a suitability report prepared pre introduction of the MiFID regime?
- Regulated CIS
- Trust Savings Scheme
- Stocks and Shares ISA
- Buy, sell or cancel rights under a pension scheme
- Income withdrawals from a short term annuity
- Pension opt-out or transfer