End Of Chapter Questions 1-5 - CISI Financial Regu
End Of Chapter Questions 1-5 - CISI Financial Regu
End of Chapter Questions 1-5 - CISI Financial Regu
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End of Chapter Questions 1-5 - CISI Financial Regulations
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End of Chapter Questions 1-5 - CISI Financial Regu
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End Of Chapter Questions 1-5 - CISI Financial Regu
End of Chapter Questions 1-5 - CISI Financial Regulations
Chpt 4 Q 16: When do the prospectus advertisements rules apply? (NOTE, not covered in the slides so don't worry too much) - Answer-The prospectus rules apply to offers, or admission to trading, of transferrable securities in respect of wh...
where an election to produce a prospectus has been
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End of Chapter Questions 1-5 - CISI Financial Regu
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End of Chapter Questions 1-5 - CISI
Financial Regulations
Chpt 4 Q 16: When do the prospectus advertisements rules apply? (NOTE, not covered in the slides so
don't worry too much) - Answer-The prospectus rules apply to offers, or admission to trading, of
transferrable securities in respect of which:
1. A prospectus is required under S85 FSMA.
2. Where an election to produce a prospectus has been made under S87 FSMA.
Chpt 4 Q 17: When is a firm permitted to undertake an unsolicited communication (cold calling) with a
retail client? - Answer-1. The recipeint has an exisitng client relationship with the firm and would envisage
such a call, or;
2. The call relates to a gernally marktable packaged product (not a hgher-volatility fund or a life policy
linked to such a fund), or;
3.It relates to a controlled activity relsting to a limited range of invetsments, including deoposits and
readily realisable invetsments (not warrants or makedable non-geared packaged products).
Chpt 4 Q 18: What are the rules on churning and who do they apply to? - Answer-Churning is over-
dealing for a client to generate extra fees. COBS says that a series of transactions in isolation that looks
suitable may not be if trades are so frequent as to be determinantal to the client.
It applies to firms trading on behalf of their clients, eg investment managers.
Chpt 4 Q 19: What is the purpose of the suitability rules? - Answer-To ensure personal recommendations
(or decisions to trade) are suitable for the client's needs.
Chpt 4 Q 20: What is the appropriateness test? - Answer-To provide protection for non-advised
transactions.
Chpt 4 Q 21: What is the purpose of the cancellation rules? - Answer-To ensure that clients have the
opportunity to reconsider their decision within a certain period of time and are able to cancel the
transaction if they wish to.
Chpt 4 Q 22: State four steps firms could take to prevent or manage conflicts of interest. - Answer-1. For
external investment research, have information controls to stop information flowing to the rest of the firm
(Chinese wall)
2. Prepare conflicts of interest policy
3. Where conflict arises, ensure disclosure is made (only as last resort)
4. Keep records of activities when conflict of interest has arisen.
Chpt 4 Q 23: What is the difference between investment research and research recommendations? -
Answer-Investment research is information recommending an investment strategy, including opinion as to
the value/price of investments, as intended for distribution to the public (as opposed to just for use within
the firm).
, It has to be clearly labelled as investment research and presented as an objective or independent
explanation.
Chpt 4 Q 24: What payments are permitted under the inducements rules? - Answer-1. Fees and non-
monetary benefits paid by clients
2. Proper fees paid by firm, which are necessary for the provision of services.
3.Fees and non-monetary benefits paid to/by a third party.
Chpt 4 Q 25: What is the purpose of the best execution requirements? - Answer-For firms to demonstrate
to their clients how they obtain the best possible trading results.
Chpt 4 Q 26: What is an order execution policy? - Answer-The policy, which tells clients how the firm seek
to obtain the best possible result for them, must contain:
1. The factors considered when choosing the execution venue.
2. How price, cost, speed and likelihood of execution are considered.
3. Clear instruction that if a client has a specific instruction it may impact the firm's ability to obtain the
best possible results.
Chpt 4 Q 27: What is the purpose of the personal account dealing rules? - Answer-To prevent employees
from entering into a personal transaction that:
1. Involves misuse of improper disclosure.
2. Conflicts with the firm's duties to a customer.
Chpt 4 Q 28: What is trade confirmation information? - Answer-Frequent confirmation reporting for each
transaction - firms must provide essential information promptly (T+1)
Chpt 4 Q 29: How frequently must a periodic statement be sent to a retail client? - Answer-At least
quarterly.
Where a client receives deal-by-deal confirmations, statements may be sent annually.
Monthly statements must be sent for leveraged portfolios.
Chpt 4 Q 30: What is the purpose of the client money segregation and trust rules? - Answer-Restrict
comingling of clients' and firm's assets to minimise the risk of clients' assets being used by firm in event of
a default.
Chpt 4 Q 31: What are the reconciliation requirements for safe custody investments and client money? -
Answer-Safe custody investments: internal reconciliations carried out as often as necessary and any
discrepancies must be made good immediately. External reconciliations carried out as often as needed
but at least every month.
Client money: If reconciliation shows a discrepancy, firm must pay any shortfall to client by the close of
the business day the reconciliation was performed.
C1 Q1: Who are the two regulators that together make up the twin peaks of UK financial services
regulation and how do their responsibilities differ? - Answer-FCA - Oversees conduct regulation.
Responsible for protecting consumers.
PRA - Oversees prudential regulation of 'dual-regulated' firms
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