Batch 1

What is client money, and when do the client money rules apply or not?

Money a firm holds on a client's behalf, kept separate from firm money. Applies to retail and professional clients by default. Doesn't apply to fees due to the firm, money already paid to the client, or where an eligible counterparty or professional client has signed a written opt-out

When do the client money rules apply to a delivery-versus-payment (DVP) transaction?

They don't apply for up to three business days after payment. If DVP settlement hasn't occurred by close of business on the third business day, client money rules then apply

How often must client money reconciliations occur, and how fast are discrepancies fixed?

As often as necessary, with discrepancies corrected promptly, not automatically "immediately"

If a reconciliation shows a client money excess, how fast must it be withdrawn?

By close of business on the day the reconciliation is performed

How fast must a discrepancy from an external client money reconciliation be corrected?

As soon as possible - there is no fixed "close of business" deadline for external reconciliation discrepancies, unlike the same-day rule for withdrawing a client money excess

Who should ideally run a firm's external client asset reconciliation?

Someone not involved in producing or maintaining the records being reconciled

What must a firm do if it misses an internal reconciliation deadline?

Inform the FCA without delay of the failure to comply

Which organisation type is specifically exempt under CASS rules?

ICVCs, investment companies with variable capital, are specifically exempted

When do client money rules apply to a transfer into a third-party account?

When the transfer is to an account in the name of a third party and does not relate to an actual transaction

What must firms tell professional clients about protecting their money and investments?

Steps taken, relevant compensation or guarantee scheme details, and any security interest, lien, or set-off

Which of the following counts as client money: a transaction fee due to the firm, money held by an approved bank, a settlement charge due to the firm, or money held in excess of a client's obligations?

Money held in excess of a client's obligations. Amounts 'due to the firm' are never client money, and approved banks don't have to treat money deposited with them as client money — only any excess over the obligation must be returned or treated as client money.

How often are periodic statements sent to retail clients, and what's the exception?

Quarterly by default, annually if the client also gets deal-by-deal confirmations

How long must confirmation records be kept for MiFID business versus non-MiFID business?

Five years from date of dispatch for MiFID business, but only three years from dispatch for non-MiFID business

How long must client verification records be kept under JMLSG guidance?

Five years from the date the account was closed, distinct from the MiFID confirmation record-keeping rule

How long must records be kept relating to a life policy or pension contract?

At least five years, regardless of when cancellation rights were exercised within the contract's life

Which records specifically fall under COBS record-keeping requirements when a firm acquires another business?

Client agreements and suitability records - not payroll, personal tax records, or data subject access request responses

Which member firm is responsible for reporting an off-order book trade between two LSE members?

The more senior party to the trade. If both are of equal seniority, responsibility falls to the selling member firm

Are firms required to record client order calls made on personal mobile phones?

No - the electronic communications recording rules do not cover telephone conversations made using personal mobile phones

Which client communications must be recorded under telephone or electronic recording rules?

Those relating to receiving, arranging, or executing client orders, e.g. a call to a broker to execute an order - not general internal enquiries

What is the general trade reporting deadline, and what are the key exceptions?

Default is within 3 minutes of trade for LSE, off-order-book, and gilts. CREST domestic equities report by 8pm same day. Omgeo international equities report by 9pm same day

What's the deadline for reporting a trade executed after the Trade Reporting Period closes, e.g. at 6:15pm?

It must be reported by the start of the next Trade Reporting Period, rather than immediately

By when must trade confirmations be sent to clients, absent any other agreement?

Promptly - by the end of the business day following the trade, T plus 1

Who recognises and regulates exchanges and clearing houses in the UK?

The FCA is responsible for recognising, regulating, and supervising exchanges and clearing houses in the UK

Which transactions are excluded from FCA transaction reporting, and which are covered?

Stock lending, repo, asset trading, and syndications are excluded. Shares, bonds, and certain derivatives are covered

What does UK SFTR require, and what's a key UK-specific exemption?

Reporting requirements and limits on collateral reuse, covering repo, securities lending, margin lending, and commodities lending. UK non-financial counterparties, unlike in the EU, are exempt from reporting

What is EMIR's core focus, and what is it not directly responsible for?

Transparency and risk management of OTC derivatives markets. Ensuring orderly market functioning is a regulator objective, not a specific EMIR requirement

Under SFTR, when must securities financing transactions be reported?

At initiation AND for lifecycle events throughout the transaction — not just at the start, and not merely daily.

Are stock lending, borrowing, or repo transactions reportable under UK MiFIR transaction reporting?

No — these securities financing transactions are specifically exempt from UK MiFIR reporting and are instead reportable separately under SFTR.

What is the core purpose of the financial promotion rules, and how does Consumer Duty reinforce it?

Promotions must be identifiable as such and fair, clear, not misleading. Principle 12, Consumer Duty, requires this to help deliver good retail outcomes

Since July 2023, does Consumer Duty apply to professional clients as well as retail?

No - it applies only to retail clients, across consumer credit, deposit taking, insurance, investments, and regulated mortgages

How does a firm apply Consumer Duty if it serves both retail and professional clients?

It must comply with the relevant requirements for each customer type it serves - the Duty applies to in-scope retail products and services, not automatically to all clients or only new ones

Which communications are excluded from the financial promotion rules?

Those subject to the Takeover Code, one-off promotions that aren't cold calls, and promotions for unregulated CIS. Derivatives promotions are still covered

Do financial promotion rules cover stakeholder pension schemes?

Yes - stakeholder pensions are within scope, unlike the excluded products: qualifying credit, home purchase or reversion plans, non-investment insurance, and unapprovable unregulated CIS

Do real-time financial promotions require approval before use, unlike non-real-time ones?

No - only non-real-time promotions, such as emails, require approval, real-time promotions are exempt from this requirement

What are the main categories of financial promotion, and which products are excluded entirely?

Real-time vs non-real-time, and direct offer vs non-direct offer. Excluded are qualifying credit, home reversion or purchase plans, non-investment insurance, and unapprovable unregulated CIS

What defines a 'direct offer promotion'?

One containing an offer to enter an agreement with the recipient, and specifying how they should respond

Can a firm approve its own financial promotions?

Yes - a firm may approve its own promotions as well as those of other firms

What must promotions quoting a yield always show?

A balanced impression of both short-term and long-term prospects

When can an unauthorised person communicate a financial promotion?

Only once an authorised firm has approved it as compliant

What must be disclosed at first contact in a non-written promotion, e.g. a cold call?

The individual must always identify themselves and the firm they represent

Is an unsolicited email considered a cold call?

No - email allows the recipient time to consider their position, so it isn't treated as a cold call

What promotion type is a website with an online application facility?

A direct, non-real-time offer

Who checks a non-real-time promotion is fair, clear and not misleading?

An individual with appropriate in-firm expertise

What must a written ad state if it could be mistaken for a prospectus?

A bold, prominent statement that it is not itself a prospectus

What's the minimum performance-history period a promotion must show?

At least 5 years, or the product's life if shorter

What must promotions use instead of simulated past performance for future projections?

Reasonable, realistic assumptions supported by objective data and clear risk warnings

What's the Prospectus Regulation's core aim?

Cheaper, easier cross-border capital raising by avoiding multiple national approval versions

With regard to approving a non-real time financial promotion, who ends up responsible for it?

A firm can use any third party authorised to approve it, but once approved, responsibility for the promotion passes to that approving third party — not the original firm.

What must be disclosed in all written communications with a retail client?

The firm's name and business address, fair, prominent indication of any relevant risks, and sufficient information clear to the average recipient. Consistency with prospectus information is NOT part of this rule.

A tech firm sells shares to the public online without needing a prospectus. Which rules govern the offer instead?

The COBS financial promotion rules apply. Prospectus regulation rules only apply where a prospectus is actually required, where none is required, financial promotion rules fill the gap

How long must records of periodic statements be kept, and does this cover all client types?

Five years — for retail and professional clients. Eligible counterparties aren't covered by this retention requirement.

Can a direct offer promotion omit its mandatory charges information?

Yes, if the charges are in another document the client can refer to when responding. Risk level, promotional history, and thresholds are not valid grounds.

Which reporting regime exists specifically to support FCA market abuse surveillance — MiFIR or EMIR/SFTR?

UK MiFIR. EMIR/SFTR serve systemic risk/transparency monitoring instead. Reporting can go via an ARM, and UK branches of third-country firms are also caught.

What is the purpose of holding client money in trust?

To ring-fence it from the firm's own insolvency — the firm can't use it to repay its own creditors. Protects the client, not the bank.

What CAN be promoted via an unsolicited real-time cold call?

A personal pension. Higher volatility funds, warrants, and geared packaged products cannot be cold-called.

Under CASS 7, is money received from a client for a proposed transaction 'client money'?

Yes. Money owed BY the client TO the firm, collateral held for margin, and money already invested on the client's behalf are not.

Under COBS 4.8, what's a compliant cold call?

A controlled activity (e.g. advice) in readily realisable securities (other than warrants), to a retail client who envisages such calls as an existing client.

Under UK EMIR, who must report a derivatives trade?

Both counterparties, unless one reports on behalf of both by prior arrangement.

What kind of financial promotion can an authorised firm NOT approve on behalf of an unauthorised firm?

A non-written communication, e.g. a telephone call — it could too easily be changed after approval.

A mailshot email promotes the sender's website. Does the Distance Marketing Directive cover both?

Yes — since the email promotes the website, both are covered.