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WorksheetsThe Financial Free Zone Law 4
Total questions: 25
Worksheet time: 13mins
Whenever an authorised firm communicates any information to a person in, or from, the DIFC:
The authorised firm must attempt to limit or avoid liability in any way when communicating with a client.
the authorised firm must provide that information directly to another person.
if the marketing material is intended only for retail clients, a clear statement to that effect.
it must take reasonable steps to ensure that the communication is clear, fair and not misleading.
The DFSA rules relating to suitability apply where an authorised firm:
undertakes a transaction with a market counterparty;
undertakes an execution-only transaction;
makes a financial promotion.
undertakes the activities of accepting deposits or providing credit.
The firm would need to take into account the following when checking if the financial product or
service is suitable:
the client’s attitude to invest in derivatives.
the client’s investment objectives;
Knowledge about financial markets
The account is discretionary or non discretionary.
Where an authorised firm has knowledge of a (potential) conflict or a material interest, it must
prevent or manage that conflict by:
relying on a written policy of dependence
disclosing the conflict of interest to the client verbally or in writing
establishing and maintaining effective Chinese walls
restrict the communication in any other means.
Following is true about inducements:
Any direct or indirect benefit the firm may receive
commissions and other direct or indirect benefits
Does not Applies to all Discretionary portfolio management agreement
The details of the inducement have to be disclosed
A firm may only accept goods or services under a soft dollar agreement if they are reasonably
expected to:
assist in the provision of investment business services to the authorised firm’s clients
provide portfolio valuation or performance measurement services
provide market price services.
All of the above
Any soft dollar arrangements that a firm may have- find the odd one out.
must be detailed in writing
contain no price advantages
continue to provide best execution to its clients
ensure that the services provided by the broker are competitive.
Details on soft dollar agreement would need to be disclosed to a firm’s clients periodically which is
Annually
Monthly
Every six month
Quarterly
Authorised firms are required to establish and maintain adequate policies and procedures to ensure
that an employee does not place a personal account transaction unless
the firm has given its written permission to that employee for the transactions in general
rules are made a term of each company’s employee’s handbook
the firm has provided, in writing to the employee, its rules regarding personal account transactions
the transaction conflict with the firm’s duties to its clients
An authorised firm that prepares and publishes investment research must have procedures and
controls to ensure that:
its investment analysts are supervised and managed effectively;
the actual or potential conflicts of interest are post facto managed;
the investment research issued to clients is not impartial
the investment research contains the financial promotion disclosures
An authorised firm must not knowingly execute an own account transaction in an investment, which
is the subject of investment research, prepared by the authorised firm, until the clients for whom the
investment research was principally intended have had a reasonable opportunity to act on it. This
rule does not apply:
if the firm is a counter party
if it is expected that the price of the investment will be materially affected.
if the firm executes an execution-only transaction for a client.
if the firm executes a discretionary order.
A firm must take reasonable steps to ensure that when it publishes investment research, or if a
representative of the firm makes a public appearance, it discloses the following matters:
any share holding by the firm of 5% or more of the total issued share capital of the issuer
any share holding by the firm of 1% or more of the total issued share capital of the
issuer
any trade finance business undertaken by the authorised firm
any future private banking initiatives planned
If the firm has agreed to manage an offer of securities it needs to disclose to its corporate finance
client the following:
the process that the firm proposes to adopt to determine what actual recommendations it will
make about allocations for the offer;
details of how the target investor group, to whom it is planned to offer the securities, will be
identified;
the process through which recommendations are prepared, and by whom;
all of the above
The firm must provide written statements to the client (the periodic statement) within a suitable
Interval, in relation to transactions that are undertaken with a market counterparty:
quarterly
monthly
six monthly
annually
The DFSA rules relating to best execution do apply to an authorised firm with respect to a
transaction
When an authorised firm agrees to execute any transaction with or for a client in relation to
an investment
with a market counterparty;
where the firm carries out a transaction for the purposes of operating a fund of which it is the
operator or
where it is an execution-only transaction
Best execution is about
dealing at a price that is less advantageous to the client
not to consider relevant direct and indirect cost that could affect decisions on when, where and
how to trade.
determining the best overall price available in a relevant market for a particular
investment
taking a mark-up from the price at which it executed the transaction
An authorised firm which is an ATS operator is not required to provide best execution for its clients if
the clients are dealing with each other on the ATS and firm is not acting for or on their
behalf.
the clients are dealing with each other on the ATS
firm is not acting for or on their behalf.
the clients are dealing with each other on the ATS or firm is not acting for or on their behalf.
A firm can only enter into non-market price transactions if it has taken reasonable steps to ensure
that the particular transaction is not being entered into by the client for any improper purposes.
This rule does not apply, however, in relation to a non-market price transaction that is subject to the rules of
DIFCA
Collective investment fund
An AMI or a regulated exchange
Trust fund
A firm must make and retain voice recordings and recordings of other electronic communications of
its telephone calls used for
negotiating, agreeing, confirming transactions general conversations
agreeing, arranging and confirming transactions, communications about market conditions
negotiating, arranging transactions ,general conversations and communications about market
conditions
negotiating, agreeing, arranging and confirming transactions
A firm when first establishing a relationship with a person as a professional client for the purposes of
carrying on a financial service, has to inform that person of his option to be treated as a retail client;
From DFSA, this is
Requirement
Voluntary
To be Mutually agreed with client
None of the above.
Voice and electric communication recordings must be retained for a minimum of
quarterly
monthly
six months
annually
When an authorised firm passes a client order to another person for execution, it must promptly
make a record of the following:
the identity of the person instructed; the terms of the instruction; and the date and
time that the instruction was given.
the identity of the person instructed; the terms of the instruction; and the name of the
counterparty
the identity of the person instructed; the terms of the instruction; the identity and account
number of the client
the identity of the person instructed; the identity of the employee executing the transaction;
and the date and time that the instruction was given.
An authorised firm must deal with own account transactions and client transactions fairly and in due
turn, ie, orders should be dealt with on a
‘first come, first served’ basis
Last in first out basis
Priority to own account transactions
Priority to client transactions
The DFSA would consider a person to be controlled by an authorised firm
if that account is operated in accordance with the instructions of the authorised firm.
if that person is inclined to act in accordance with the instructions of the authorised firm.
Both of the above
None of the above
All money held or controlled on behalf of a client in the course of, or in connection with, the
carrying on of investment business in or from the DIFC is client money except money which is:
belonging to another person outside authorized firms’ group.
not immediately due and payable by the client to the authorised firm
in an account in the client’s name over which the authorised firm has no mandate
fund property of a fund
