This Annex belongs to COBS 10.2.9G(1)(n).
1When determining whether a retail client has the necessary knowledge to understand the risks involved in relation to a qualifying cryptoasset, a firm should consider asking the client questions that cover, at least, the matters in (1) to (12).
Firms may need to ask additional or alternative questions to ensure that the retail client has the necessary knowledge to understand the risks involved in relation to the specific type of qualifying cryptoasset offered.
The matters are:
the role of the business offering or marketing the qualifying cryptoasset (the business) and the scope of its services, including what the business does and does not do on behalf of clients, such as what due diligence is and is not undertaken by the business on any underlying investments;
the nature of the client’s rights and obligations with the business, in particular the nature of the legal and beneficial ownership of the qualifying cryptoasset and the risks associated with those rights;
the potential complexity of investments in qualifying cryptoassets and the associated difficulty of understanding the risks of the investment;
the risk of losing money or any qualifying cryptoassets purchased as a result of operational risks (such as through cyber-attacks, loss of private keys, comingling of funds) or financial crime;
the risk to any management and administration of the client’s investment in the event of the business becoming insolvent or otherwise failing;
the extent to which the protection of the Financial Ombudsman Service or FSCS apply to the investment activity (including the fact that these services do not protect investors against poor investment performance and that the Financial Ombudsman Service cannot ordinarily consider complaints in relation to unauthorised persons);