CISI UK financial regulations (certs) Chapter 4
Define COBS - Answer-Conduct of business soucrbook (COBS), are set of rules which investment firms should follow that are subject to MiFID and those that are not
What firms are subject to COBS - Answer-Firms that operate in the UK, or have an ap...
CISI UK financial regulations (certs)
Chapter 4
Define COBS - Answer-Conduct of business soucrbook (COBS), are set of rules which investment firms
should follow that are subject to MiFID and those that are not
What firms are subject to COBS - Answer-Firms that operate in the UK, or have an appointment
representative who are domiciled in the UK. Also applied to firms that deals with UK based clients
What firms are exempt from COBS - Answer-Investment research and personal account dealing firms,
where the rules only apply to home state basis only
What activities are subject to COBS - Answer-1) Designated investment business
2) long term insurance business in relation to life policies
3) accepting deposits
Do COBS rules apply to appointment representatives? - Answer-No, COBS rules apply to firms (approved
persons) in relation to the relevant activities carried carried out by their appointed representatives.
Appointed representatives are exempt, and the firm are responsible for their activity.
What's rules are stated around electronic media under COBS - Answer-FCA have rules on electronic
media, this is to keep information updated, e.g through website as well as ask for consent in order to be
contacted. Information must be up to date, and easily accessible, new information must be notified asap.
What are the rules under recording telephone conversations and electronic communications - Answer-
The rules apply to firms which carry out the following activities
- Receiving client orders
- Executing client orders
-Arranging for client orders to be executed
-Carrying our transaction on behalf of firms
-Executing orders that result from decisions of firms
Recordings should be retained for 5 years
What are the three client categorisations? - Answer-- retail
- professional
- eligible counterparty (ECP)
Define client - Answer-COBS define client as someone to whom a firms provides, tend to provide or has
proved regulated activity services. This includes potential clients as well as a person acting as an agent.
What does per se mean - Answer-Automatic default
Retail client characteristics - Answer-- low knowledge
- high protection
ECP characteristics - Answer-- high knowledge
- low protection
, Examples of per se professional clients - Answer-- banks
- investment firms
- assets mangers
- pension funds
- central bank
- national government
What does elective client mean - Answer-When a client, opts up from retail to professional, or
professional to ECP
Characteristics of large undertakings for MiFID firm - Answer-Companies who's balance sheet, turnover
or own funds meet certain levels
Meet following two size requirements
- balance sheet of €20 million
- net turnover of €40 million
- own funds of €2 million
Characteristics of large undertakings for non-MiFID firm - Answer-Called up share capital or net assets in
the last 2 years has been at least £5million
Or
- balance sheet total of €12.5m
- a net turn over of €25m
- an average of 250 employers during the year
Characteristics of large undertakings for a partnership of an unincorporated association - Answer-Net
assets past two years has at least £5m
Characteristics of large undertakings for a trustee or a trust - Answer-Net assets of the past two years of
at least £10m
Characteristics of large undertakings for a trustee of an occupational pension - Answer-In the past two
years had at least 50 members and has at least £10m in AUM
What business can be categorised as an ECP - Answer-- executing orders
- dealing on own account
- receiving and transmitting orders
- ancillary services relating to dealing
- Arranging
What is MiFID 11 - Answer-Introduced to protect local authorities and municipalities, which are classified
as a per se retail client. They can be re-classified as an elective professional client when they comply with
following circumstances.
- Portfolio exceed £10m
Satisfy one of a/b/c
A) quantitive test - transactions in significant size, 10 per quarter in the last 4 quarters.
B) qualitative test - person authorised to carry out transactions on behalf of the authority has worked in
the finance sector for at least 1 year
C) The authority is an "administering authority" of the local government pension scheme
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