two half-days with case studies – for advisers, discretionary fund managers and compliance staff
INTRODUCTION
Course objectives
The role of compliance in the advice process
Benefits of good fact-finding and suitability letters
Risks of non-compliance
MiFID arts 24-25 general principles
ADVANCE DISCLOSURE OF THE SCOPE OF THE SERVICE
Choosing clients
Defining terms under MiFID and MiFID Org
- Advice
- Personal recommendation
- Execution-only
- Insistent customer
- Discretionary fund management
- Independence
- Agreeing the scope of advice – full or focused advice
Client agreements
Disclosure of charges
Product disclosure
PERSONAL RECOMMENDATIONS AND SUITABILITY GENERALLY
The general rule and idea
MiFID Art. 25
Know your customer
Understanding existing investments and arrangements
Risk-profiling – and the various types of customer and product risks
Partially completed forms
Extent of information to be collected from clients (proportionality)
Reliability of client information
Updating client information
Client information for legal entities or groups
Collecting information about each individual client and assessing the suitability for each individual client
Know your product and service MiFID Org Reg, Art. 54
Costs and complexity of equivalent products
Product governance obligations for distributors
Costs and benefits of switching investments
Suitability
Understanding the scope of the mandate
Balancing elements with different risk profiles
Use of non-correlated asset types and compliance risks
Mixing investments and protection
Use of platforms
Duty to review existing investments
Leverage
Non-standard assets
Particular Product Problems
Analysing funds
Identifying assets and compliance risks
Tax and other wrappers
Uses of derivatives
Absolute return offerings
CONSTRUCTING A COMPLIANT SUITABILITY REPORT & OTHER DISCLOSURE REQUIREMENTS
Regulatory requirements – disclosure of mandates and risks and suitability reports
Form – concise, readable, clear
Substance – explanation for why product recommended and disclosure
Live demonstration of such a letter
MONITORING ADVICE AND DISCRETIONARY FUND MANAGEMENT STANDARDS
Compliance obligations under SYSC
Core risk management
Competent employee rule
KPIs and management information that is useful
Spotting future problems – indications
Taking action when things go wrong