December Admin Meeting – ESMA Requirements 1, 8-10

ESMA Requirements Understand the key characteristics, risk and features of Packaged Products VCT/ EIS/BPR/Film/SCARP/Structured Deposit + NS&I, other Deposits, including transaction costs and tax implications. Assess data relevant to Investment Products on which they provide information to clients, such as: Key Information Documents, Prospectuses, Financial Statements or Financial Data. Understand specific market structures for the Investment Products on which they provide information to clients and where relevant, their trading venues or the existence of a secondary market. Have a basic knowledge of valuation principles for the type of Investment Products in relation to which the information is provided.

Retail Investment Products VCT and EIS Both offer access to unlisted companies with tax incentives. More risky than listed companies eg Glaxo, Aviva etc and with minimum holding period to retain the upfront tax relief of 30%, which is a tax reducer. SEIS enjoys 50% relief. Nb. Relief on new shares only.

Retail Investment Products Comparison between VCT and EIS: VCT : £200k – 5 years, tax free dividends, no CGT and no Carry Back. EIS : £1m - 3 years, taxable dividends, no CGT after 3 years, CGT deferral, 1 year Carry Back, IHT exempt after 2 years. SEIS: £100K – 3 years, 1 year carry Back, taxable dividends, no CGT after 3years, no CGT deferral.

Retail Investment Products Business Property Relief Schemes: Investment into unlisted companies – some of which may be EIS qualifying. IHT free, on death, after 2 years. Largely risk reduced with returns circa 3% pa. Film: Many issues where HMRC have challenged. Involved loans to invest in films, with reliefs and allowable losses. Often replaced by EIS.

Retail Investment Products SCARP: Structured Capital at Risk Product. Provides an agreed return – growth or income – over a finite period but exposes the client to a range of outcomes in relation to initial capital. Structured Deposit: Deposit account where the interest is related to an asset, commonly an index eg FTSE 100. Initial investment guaranteed but perhaps nil return if index disappoints. FSCS protection to £85,000.

Retail Investment Products National Savings & Investments: Premium Bonds: Max £50,000, Min £100, tax free. Projected return 1.4% currently - 24,500:1. Guaranteed Growth Bonds: Max £3,000, min £100, 2.2% fixed for 3 years. Guaranteed Income Bonds: Max £3m, min £500, 1.45% for 1 year, 2.15% for 3 years. JISA: Max £4,128, min£1, tax free. DirectISA: Max £20,000, 1%, tax free. DirectSaver: Max £2m, 0.95%, gross. Income Bonds: Max £1m, min £500, 1% gross. Investment Account: Max £1m, min £20, 0.7%.

Retail Investment Product NS&I A part of government funding and is restricted as to what they it may raise. As a result, there are no Savings Certificates available at this time.

Retail Investment Products Banks/Building Societies: Interest bearing. FSCS protection to £85,000 per account holder. Fixed and variable rates. Monthly and annual payments.

ESMA 8 Assess data relevant to Investment Products on which they provide information to clients, such as Key Information Documents, prospectuses, financial statements or financial data.

ESMA 9 Understand specific market structures for the Investment Products on which they provide information to clients and where relevant, their trading venues or the existence of a secondary market.

ESMA 10 Have a basic knowledge of valuation principles for the type of investment products to which the information is provided.

Summary Point 1- Understand the key characteristics, risk and features of Packaged Investment Products –VCT, EIS, BPR, Film, SCARP/Structured Deposits + NS&I products and Deposits. Point 8 – Assess data relevant to Investment Products such as KIDs, prospectuses, statements. Point 9 – Understand specific market structures for the Investment Products and where relevant, their trading venues or existence of secondary markets. Point 10 – Have a basic knowledge of valuation principles for the Investment Products.