1. MiFID for Investment Managers, Client Relation Managers and Brokers 2007

2. This Presentation will cover: The new Client Categorizations What additional Know Your Customer information we need to collect What is advice (personal recommendation) under MiFID When are the Duties of Suitability and Appropriateness owed to clients, and what are they? How does the narrower definition of “execution-only” apply to the firm? What is the new duty of “best execution” and what is the firm’s policy? Changes in recording orders and transactions

3. Client Categorization

4. Professional Clients Retail Eligible Counterparty Clients References to clients and to professional clients include eligible counterparties

5. [Suggestion- select which of 3 categories of clients the firm will have: choice of putting new criteria for each category onto slides, or of handing out this information, and only setting out key differences current and new categories such as firm’s policy on categorizing other regulated firms as eligible counterparties or professional clients, application of financial criteria on single company rather than group basis, limiting of eligible counterparty status to dealing and arranging services, different financial size criteria in new categories from present categories etc] How will the new Client Categories apply to the firm?

6. How will the new Client Categories apply to the firm? – Examples? [give examples of particular firm clients under current and new rules]

7. How will existing Clients be categorized under the new Rules? All clients at 31 October 2007 map across to equivalent new category even if new criteria not satisfied  Market Counterparty to Eligible Counterparty  Intermediate Customer to Professional Client  Private to Retail Client But only if firm holds records under current rules evidencing correct categorization

8. How will the new Client Categories apply to existing clients of the firm – examples of inadequate records [select examples from firms records relevant to its categories e.g. information on opted up intermediate clients who are small corporates or individuals.]

9. Know Your Customer

10. What additional Know Your Customer information should you collect under the new Rules? [Firm to complete any additional KYC information from NEWCOB or other sources for different categories. For detailed slides on KYC under new rules see separate sheet of questions and answers on Suitability and Appropriateness of Christopher Bond on the member’s section of the website.]

11. Advisory Services (Personal Recommendations)

12. Summary of the definition of “Personal Recommendation” Recommendation to buy sell or hold Given to a particular investor or potential investor (e.g. not widely distributed) Awareness of investor’s particular circumstances (i.e. we hold KYC on client) Important because a “personal recommendation” is “advice” under NEWCOB with suitability consequences Note: It will not be a personal recommendation if issued exclusively through distribution channels or to the public.

13. The definition of “Personal Recommendation” - Examples [Here give examples relevant to firm’s business e.g. (in retail) brokers recommendations (not a p.r.) followed by phone call with client (probably a p.r.) or (in wholesale) trade ideas sent to selected clients (not a p.r.) followed by price negotiation with professional client (probably not a p.r.)]

14. Suitability and Appropriateness

15. When is the Duty of Suitability owed to Clients? When advisory or discretionary management services provided (but duty of Appropriateness may apply when other services provided) To both Retail and Professional Clients (but not to Eligible Counterparties).

16. What are the Duties of Suitability and Appropriateness? AppropriatenessSuitability Note: Suitability Reports may need to be made to clients KYC Knowledge (Not Professional Clients) Experience (Not Professional Clients) Financial Situation (Not per se Professional Clients) Knowledge (Not Professional Clients) Investment Objectives Experience (Not Professional Clients)

17. Duty of Suitability - Examples [here put in different types of clients of firm, if they will be owed duty of suitability, and how the firm’s procedures will change to meet new detailed requirements.]

18. Execution - Only

19. What Transactions will be covered by the execution - only exemption? Transaction is at the initiative of the client Security is of “non-complex” type (see next slide) Security is frequently traded Security has no future or contingent liability Enough information is available for clients to make an informed judgement Client is warned there is no duty of suitability

20. What Securities are “non-complex”? Shares admitted to trading Regulated Market on EEA Stock Exchange or Exchange on appropriate list UCITS (including OIECs) Money Market Instruments Bonds and Securitized Debt (if no embedded derivatives) Non-complex

21. Exemption – only - Example [put in examples from the firm’s securities activities]

22. Best Execution

23. What is the Duty of Best Execution? “a firm must take all reasonable steps to obtain, when execution orders, the best possible result for it’s clients taking into account the execution factors” (NEWCOB 11.2.1) Note: Applies to both Retail and Professional Clients

24. Best Execution – The Firm’s Policy [here put in relevant parts of the firm’s best execution policy and disclosure to clients]

25. Records

26. Recording of Orders and Transactions [here put in changes to the firm’s recording procedures.]