CISI UK FINANCIAL REGULATIONS (REGS)CHAPTERS 4 EXAM 2025 WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED ANSWERS

CISI UK FINANCIAL REGULATIONS (REGS)CHAPTERS 4 EXAM 2025 WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED ANSWERS Explain client agreements - ANSWERSFirms must enter into a written agreement with a client, explaining rights and obligations between firm and client. This applies to investment business for retail clients, MiFID business and ancillary services Does not apply to life assurance firms Records must be kept for 5 years or duration of the client relationship whatever is longer What are the information requirements when managing retail client investments - ANSWERS- info on method, frequency and valuation of methods - details of delegation and management of the client portfolio - benchmark of performance - type of investments, limits - risk - costs and associated charges Define client - ANSWERSCOBS 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. Define COBS - ANSWERSConduct 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 - ANSWERSFirms 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 - ANSWERSInvestment research and personal account dealing firms, where the rules only apply to home state basis only What activities are subject to COBS - ANSWERS1) Designated investment business 2) long term insurance business in relation to life policies 3) accepting deposits Do COBS rules apply to appointment representatives? - ANSWERSNo, 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 - ANSWERSFCA 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. Explain timing and medium for disclosure - ANSWERSInformation should be provided in good time before the provision of services or the information should be provided immediately after the provision of services. Should also disclose info - at the request of the client - phone call What are the three client categorisations? - ANSWERS- retail - professional - eligible counterparty (ECP) What does per se mean - ANSWERSAutomatic default Retail client characteristics - ANSWERS- low knowledge - high protection Professional client characteristics - ANSWERS- mid level knowledge - mid level protection ECP characteristics - ANSWERS- high knowledge - low protection Examples of per se professional clients - ANSWERS- banks - investment firms - assets mangers - pension funds - central bank - national government What does elective client mean - ANSWERSWhen a client, opts up from retail to professional, or professional to ECP Characteristics of large undertakings for MiFID firm - ANSWERSCompanies 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 - ANSWERSCalled 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 - ANSWERSNet assets past two years has at least £5m Characteristics of large undertakings for a trustee or a trust - ANSWERSNet assets of the past two years of at least £10m Characteristics of large undertakings for a trustee of an occupational pension - ANSWERSIn the past two years had at least 50 members and has at least £10m in AUM What business can be categorised as an ECP - ANSWERS- executing orders - dealing on own account - receiving and transmitting orders - ancillary services relating to dealing - Arranging What is MiFID 11 - ANSWERSIntroduced 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 Define Agents - ANSWERSAgent is the approved person providing services. If it's a three person chain then and the firm is providing (A) a service but they are providing client (B) using that information. The firm should regard A as the client unless there is a signed doc saying that (B) is the client instead What are the rules under recording telephone conversations and electronic communications - ANSWERSThe 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 How can a retail client be treated as an elective professional client? - ANSWERSThe firm has assessed the clients expertise, experience and knowledge, believe that they can make their own investment decisions and understands the risks involved. And for MiFID business 2 of 3 must apply - 10 significantly sized transactions executed in the last 4 quarters - portfolio exceeds €500,000 - client has worked in financial sector for at least a year How can an professional client be treated as an elective eligible counterparty? - ANSWERS- company - regarded as a per se professional client - client has asked to be treated as such and is already and elective professional client - client agrees with firm to be treated as an ECP Explain how clients can opt down and what are the benefits - ANSWERS- A ECP can opt down to professional - per se professional can opt down to retail - A ECP can opt down to retail The benefits are higher levels of protection What are the information requirements for safeguarding retail clients investments - ANSWERSFirms must provide following - summary of the steps the firm has taken to protect the clients money/investments: investor compensation, deposit preference etc What are the required disclosures for all clients? - ANSWERSProvide information on costs and charges How should a firm act when keeping a client up to date - ANSWERSNotify clients in a good time about material change, information must be a durable medium if the information giving relates to a durable medium. Explain compensation info - ANSWERSIf a firm is part of a compensation scheme, for a example a investment firm offers the client to purchase a certain product however the firm will receive a monetary gain from this. The firm must be transparent with the client about this What is retail distribution review (RDR) - ANSWERSProtect clients, in order for advisory firms to be better in terms of services - improve clarity with firms describe species to consumers - explain to client when making commission - increase the professional standard of advisers What does the term acting independently mean - ANSWERSThis means that a firm does not receive any monetary gain from a third party which supply the financials products which the investment firm advise on What are the three main things you should do when communications with clients - ANSWERSFair Clear Not misleading What are the application of rules on communications with clients in regard to financial promotion rules - ANSWERSUnder FMSA the person has to be an authorised firm or be the financial promotion has to be approved by an authorised firm Theses rules apply to COBS firms who are communicating with clients, regarding investment business. What are the exceptions for communication with clients in regard to financial promotion rules - ANSWERS- mortgage, qualifying for credit - non investment insurance contract - unregulated CIS which is not permitted to approve What is the purpose of financial promotion rules - ANSWERSTo ensure that the promotions are ident