QUALITATIVE PRELIMINARY ASSESSMENT - NON-READILY REALISABLE SECURITIES (A PRIVATE COMPANY)
WHAT IS THE APPROPRIATENESS TEST?
The appropriateness test is a requirement introduced by the regulator from 1st November 2007 for non-advised promotions and subsequent sales (i.e., where there is no Financial Adviser providing advice).
WHO SHOULD ANSWER THE QUESTION?
If you are a potential client who is not receiving financial advice from an Appointed Representative Firm of an Authorised and Regulated Firm (An ARF) and/or Capital Pilot Advisory (a trading name of Sturgeon Ventures LLP) to make an investment in what is defined as a ‘Complex’ investment product, you will need to answer the questions below before we can allow this type of Financial Promotion to be made, followed by a Self-Certification that you can take up an Exemption that you are not an Ordinary Retail Client.
Based on your answers to the questions, which is a Preliminary Qualitative Assessment of Appropriateness before sending you a letter to self-declare as a Certified High Net Worth or a Self-Certified Sophisticated High Net Worth, we will try to assess if you have the necessary knowledge to understand the risks involved in these potential investment types. If you fail to answer some of these questions, we will not be able to do this. If you answer ‘no’ to any of these questions, this suggests that this investment may not be appropriate for you and we recommend that you re-consider or contact an Independent Financial Adviser for advice.
By you answering these questions, we are not going to assess whether this investment meets your financial requirements. We do not provide financial advice. If you are in any doubt about whether this investment meets your financial requirements, you should consult a Financial Adviser.
WHAT IS A COMPLEX PRODUCT?
Complex products could be anything that is not defined as non-complex Non-complex products are:
Shares listed on a recognised stock exchange
Money market instruments
Units/shares in a UCITS qualifying Collective Investment Scheme.
Specifically, complex products are anything involving derivatives or where the opportunity to sell is infrequent. This will include:
Futures, Options and Contracts for Differences
Shares in Collective Investment Schemes that are not FCA recognised
Units in a tax-exempt authorised Unit Trust
Non-Readily Realisable Securities (NRRS)
Such as investments in a Private Company
*If you have a stockbroker or a discretionary investment manager appointed and you are instructing them to invest in a complex investment, we do not need you to complete this form, as it is the responsibility of the stockbroker/investment manager to assess the appropriateness of the investment. Please include the name and contact details so we can have them confirm that they are doing it.
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Definition of Non-Readily Realisable Security
Transactions in Non-Readily Realisable Security (NRRS) are transactions in securities which are not admitted to or traded under the rules of a Recognised Exchange and which may be subject to large price fluctuations.
The risks associated with Private, Unlisted Companies may include but are not limited to:
Recently established companies may have difficulty in obtaining market acceptance of their underlying products or services.
There may be no marketing liquidity or be able to establish a proper market for them.
The management teams of such companies may be inexperienced, and the companies could therefore encounter management financial or operational difficulties which may not be able to address adequately.
Companies may underestimate their capital requirements and may have difficulty raising additional capital when required.
You should only make investments into non readily realisable securities using funds that you were not going to need for another purpose in the foreseeable future, as you may be unable to sell such securities at the time of choosing due to the lack of or little liquidity in them from time to time.
Following the Completion of The Appropriateness Test, the Individual needs to complete a Certification Letter, in accordance COBs 4.7.7.