COBS 1
Application
COBS 1.1
The general application rule
- 01/11/2007
COBS 1.1.1
See Notes
This sourcebook applies to a firm with respect to the following activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom:
- (1) [deleted]
- (2) designated investment business;
- (3) long-term insurance business in relation to life policies;
and activities connected with them.
COBS 1.1.1A
See Notes
- 01/11/2009
COBS 1.1.1B
See Notes
- 30/04/2011
Modifications to the general application rule
COBS 1.1.2
See Notes
COBS 1.1.3
See Notes
Guidance
COBS 1.1.4
See Notes
COBS 1 Annex 1
Application (see COBS 1.1.2R)
- 01/11/2007
See Notes
Modifications to the general application rule according to activities
1. | Eligible counterparty business | ||
1.1 | R | The COBS provisions shown below do not apply to eligible counterparty business. | |
COBS provision | Description | ||
COBS 2 (other than COBS 2.4) | Conduct of business obligations | ||
COBS 4 (other than COBS 4.4.1 R and COBS 4.4.2 G) | Communicating with clients including financial promotions | ||
COBS 6.1 | Information about the firm, its services and remuneration | ||
COBS 8 | Client agreements | ||
COBS 10 | Appropriateness (for non-advised services) | ||
COBS 11.2, COBS 11.3 and COBS 11.6 | Best execution, client order handling and use of dealing commission | ||
COBS 12.3.1 R to COBS 12.3.3 R | Labelling of non-independent research | ||
COBS 14.3 | Information about designated investments | ||
COBS 16 | Reporting information to clients | ||
[Note: article 24(1) of MiFID] | |||
2. | Transactions between an MTF operator and its users | ||
2.1 | R | The COBS provisions in paragraph 1.1R and COBS 11.4 (Client limit orders) do not apply to a transaction between an operator of an MTF and a member or participant in relation to the use of the MTF. | |
[Note: article 14(3) of MiFID] | |||
3. | Transactions concluded on an MTF | ||
3.1 | R | The COBS provisions in paragraph 1.1R and COBS 11.4 (client limit orders) do not apply to transactions concluded under the rules governing an MTF between members or participants of the MTF. However, the member or participant must comply with those provisions in respect of its clients if, acting on its clients behalf, it is executing their orders on an MTF. | |
[Note: article 14(3) of MiFID] | |||
4. | Transactions concluded on a regulated market | ||
4.1 | R | In relation to transactions concluded on a regulated market, members and participants of the regulated market are not required to apply to each other the COBS provisions in paragraph 1.1R and COBS 11.4 (client limit orders). However, the member or participant must comply with those provisions in respect of its clients if, acting on its clients behalf, it is executing their orders on a regulated market. | |
[Note: article 42(4) of MiFID] | |||
5. | Consumer credit products | ||
5.1 | R | If a firm, in relation to its MiFID business, offers an investment service as part of a financial product that is subject to other provisions of EU legislation or common European standards related to credit institutions and consumer credits with respect to risk assessments of clients and/or information requirements, that service is not subject to the rules in this sourcebook that implement Article 19 of MiFID. | |
[Note: article 19(9) of MiFID] | |||
5.2 | G | This exclusion for consumer credit products is intended to apply on a narrow basis in relation to cases in which the investment service is a part of another financial product. It does not apply where the investment service is the essential or leading part of the financial product. It also does not apply where the service provided is a combination of an investment service and an ancillary service (for example, granting a credit for the execution of an order where the credit is instrumental to the buying or the selling of a financial instrument.) The exclusion also does not apply in relation to the sale of a financial instrument for the purpose of enabling a client to invest money to repay his obligations under a loan, mortgage or home reversion. | |
6 | Use of third party processors in life insurance mediation activities | ||
6.1 | R | If a firm (or its appointed representative or, where applicable, its tied agent) outsources insurance mediation activities to a third party processor: | |
(1) | the firm must accept responsibility for the acts and omissions of that third party processor conducting those outsourced activities; and | ||
(2) | any COBS rule requiring the third party processor's identity to be disclosed to clients must be applied as a requirement to disclose the firm's identity; | ||
unless the third party processor is advising on investments. |
Modifications to the general application rule according to location
1. | EEA territorial scope rule: compatibility with European law | |||
1.1 | R | (1) | The territorial scope of this sourcebook is modified to the extent necessary to be compatible with European law (see Part 3 for guidance on this). | |
(2) | This rule overrides every other rule in this sourcebook. | |||
1.2 | R | In addition to the EEA territorial scope rule, the effect of the Electronic Commerce Directive on territorial scope is applied in the fields covered by the 'derogations' in the Annex to that Directive other than the 'insurance derogation' in the fourth indent (see paragraph 7.3 of Part 3 for guidance on this). | ||
[Note: article 3(3) of, and Annex to, the Electronic Commerce Directive] | ||||
2. | Business with UK clients from overseas establishments | |||
2.1 | R | (1) | This sourcebook applies to a firm which carries on business with a client in the United Kingdom from an establishment overseas. | |
(2) | But the sourcebook does not apply to those activities if the office from which the activity is carried on were a separate person and the activity: | |||
(a) | would fall within the overseas persons exclusions in article 72 of the Regulated Activities Order; or | |||
(b) | would not be regarded as carried on in the United Kingdom. | |||
2.2 | G | One of the effects of the EEA territorial scope rule is to override the application of this sourcebook to the overseas establishments of EEA firms in a number of cases, including circumstances covered by MiFID, the Distance Marketing Directive or the Electronic Commerce Directive. See Part 3 for guidance on this. |
1. | The main extensions and restrictions to the general application rule | ||
1.1 | G | The general application rule is modified in Parts 1 and 2 of Annex 1 and in certain chapters of the Handbook. The modification may be an extension of this rule. For example, COBS 4 (Communicating with clients, including financial promotions) has extended the application of the rule. | |
1.2 | G | The provisions of the Single Market Directives and other directives also extensively modify the general application rule, particularly in relation to territorial scope. However, for the majority of circumstances, the general application rule is likely to apply. | |
2. | The Single Market Directives and other directives | ||
2.1 | G | This guidance provides a general overview only and is not comprehensive. | |
2.2 | G | When considering the impact of a directive on the territorial application of a rule, a firm will first need to consider whether the relevant situation involves a non-UK element. The EEA territorial scope rule is unlikely to apply if a UK firm is doing business in a UK establishment for a client located in the United Kingdom in relation to a United Kingdom product. However, if there is a non-UK element, the firm should consider whether: | |
(1) | it is subject to the directive (in general, directives only apply to UK firms and EEA firms, but the implementing provisions may not treat non-EEA firms more favourably than EEA firms); | ||
(2) | the business it is performing is subject to the directive; and | ||
(3) | the particular rule is within the scope of the directive. | ||
If the answer to all three questions is 'yes', the EEA territorial scope rule may change the effect of the general application rule. | |||
2.3 | G | When considering a particular situation, a firm should also consider whether two or more directives apply. | |
3. | MiFID: effect on territorial scope | ||
3.1 | G | PERG 13 contains general guidance on the persons and businesses to which MiFID applies. | |
3.2 | G | This guidance concerns the rules within the scope of MiFID including those rules which are in the same subject area as the implementing rules. A rule is within the scope of MiFID if it is followed by a 'Note:' indicating the article of MiFID or the MiFID implementing Directive which it implements. | |
3.3 | G | For a UK MiFID investment firm, rules in this sourcebook that are within the scope of MiFID generally apply to its MiFID business carried on from an establishment in the United Kingdom. They also generally apply to its MiFID business carried on from an establishment in another EEA State, but only where that business is not carried on within the territory of that State. (See articles 31(1) and 32(1) and (7) of MiFID) | |
3.4 | G | For an EEA MiFID investment firm, rules in this sourcebook that are within the scope of MiFID generally apply only to its MiFID business if that business is carried on from an establishment in, and within the territory of, the United Kingdom. (See article 32(1) and (7) of MiFID) | |
3.5 | G | However, the rules on investment research and non-independent research (COBS 12.2 and 12.3) and the rules on personal transactions (COBS 11.7) apply on a "home state" basis. This means that they apply to the establishments of a UK MiFID investment firm in the United Kingdom and another EEA State and do not apply to an EEA MiFID investment firm. | |
4. | Insurance Mediation Directive: effect on territorial scope | ||
4.1 | G | The Insurance Mediation Directive's scope covers most firms carrying on most types of insurance mediation. The rules in this sourcebook within the Directive's scope are those relating to life policies that require the provision of pre-contract information or the provision of advice on the basis of a fair analysis. The rules implementing the minimum information and other requirements in articles 12 and 13 of the Directive are set out in COBS 7 (Insurance mediation) and COBS 9 (Suitability (including basic advice)). | |
4.2 | G | In the FSA's view, the responsibility for these minimum requirements rests with the Home State, but a Host State is entitled to impose additional requirements within the Directive's scope in the 'general good'. Accordingly, the general rules on territorial scope are modified so that: | |
(1) | for a UK firm providing passported activities through a branch in another EEA State under the Directive, the rules implementing the Directive's minimum requirements apply but the territorial scope of the additional rules within the Directive's scope is not modified; | ||
(2) | for an EEA firm providing passported activities under the Directive in the United Kingdom, the rules implementing the Directive's minimum requirements do not apply, but the additional rules within the Directive's scope have their unmodified territorial scope unless the Home State imposes measures of like effect. (See recital 19 and article 12(5) of the Insurance Mediation Directive) | ||
5. | Consolidated Life Directive: effect on territorial scope | ||
5.1 | G | The Consolidated Life Directive's scope covers long-term insurers authorised under that Directive conducting long-term insurance business. The rules in this sourcebook within the Directive's scope are the cancellation rules (COBS 15) and those rules requiring the provision of pre-contract information or information during the term of the contract concerning the insurer or the contract of insurance. The Directive specifies minimum information and cancellation requirements and permits EEA States to adopt additional information requirements that are necessary for a proper understanding by the policyholder of the essential elements of the commitment. | |
5.2 | G | If the State of the commitment is an EEA State, the Directive provides that the applicable information rules and cancellation rules shall be determined by that state. Accordingly, if the State of the commitment is the United Kingdom, the relevant rules in this sourcebook apply. Those rules do not apply if the State of the commitment is another EEA State. The territorial scope of other rules, in particular the financial promotion rules, is not affected since the Directive explicitly permits EEA States to apply rules, including advertising rules, in the 'general good'. (See articles 33, 35, 36 and 47 of the Consolidated Life Directive) | |
6. | Distance Marketing Directive: effect on territorial scope | ||
6.1 | G | In broad terms, a firm is within the Distance Marketing Directive's scope when conducting an activity relating to a distance contract with a consumer. The rules in this sourcebook within the Directive's scope are those requiring the provision of pre-contract information, the cancellation rules (COBS 15) and the other specific rules implementing the Directive contained in COBS 5 (Distance communications). | |
6.2 | G | In the FSA's view, the Directive places responsibility for requirements within the Directive's scope on the Home State except in relation to business conducted through a branch, in which case the responsibility rests with the EEA State in which the branch is located (this is sometimes referred to as a 'country of origin' or 'country of establishment' basis). (See article 16 of the Distance Marketing Directive) | |
6.3 | G | This means that relevant rules in this sourcebook will, in general, apply to a firm conducting business within the Directive's scope from an establishment in the United Kingdom (whether the firm is a national of the UK or of any other EEA or non-EEA state). | |
6.4 | G | Conversely, the territorial scope of the relevant rules in this sourcebook is modified as necessary so that they do not apply to a firm conducting business within the Directive's scope from an establishment in another EEA state if the firm is a national of the United Kingdom or of any other EEA state. | |
6.5 | G | In the FSA's view: | |
(1) | the 'country of origin' basis of the Directive is in line with that of the Electronic Commerce Directive; (See recital 6 of the Distance Marketing Directive) | ||
(2) | for business within the scope of both the Distance Marketing Directive and the Consolidated Life Directive, the territorial application of the Distance Marketing Directive takes precedence; in other words, the rules requiring pre-contract information and cancellation rules (COBS 15) derived from the Consolidated Life Directive apply on a 'country of origin' basis rather than being based on the state of the commitment; (See articles 4(1) and 16 of the Distance Marketing Directive noting that the Distance Marketing Directive was adopted after the Consolidated Life Directive) | ||
(3) | for business within the scope of both the Distance Marketing Directive and the Insurance Mediation Directive, the minimum information and other requirements in the Insurance Mediation Directive continue to be those applied by the 'Home State', but the minimum requirements in the Distance Marketing Directive and any additional pre-contract information requirements are applied on a 'country of origin' basis. (The basis for this is that the Insurance Mediation Directive was adopted after the Distance Marketing Directive and is not expressed to be subject to it.) | ||
7. | Electronic Commerce Directive: effect on territorial scope | ||
7.1 | G | The Electronic Commerce Directive's scope covers every firm carrying on an electronic commerce activity. Every rule in this sourcebook is within the Directive's scope. | |
7.2 | G | A key element of the Directive is the ability of a person from one EEA state to carry on an electronic commerce activity freely into another EEA state. Accordingly, the territorial application of the rules in this sourcebook is modified so that they apply at least to a firm carrying on an electronic commerce activity from an establishment in the United Kingdom with or for a person in the United Kingdom or another EEA state. Conversely, a firm that is a national of the UK or another EEA State, carrying on an electronic commerce activity from an establishment in another EEA State with or for a person in the United Kingdom need not comply with the rules in this sourcebook. (See article 3(1) and (2) of the Electronic Commerce Directive) | |
7.3 | G | The effect of the Directive on this sourcebook is subject to the 'insurance derogation', which is the only 'derogation' in the Directive that the FSA has adopted for this sourcebook. The derogation applies to an insurer that is authorised under and carrying on an electronic commerce activity within the scope of the Consolidated Life Directive and permits EEA States to continue to apply their advertising rules in the 'general good'. Where the derogation applies, the financial promotion rules continue to apply for incoming electronic commerce activities (unless the firm's 'country of origin' applies rules of like effect) but do not apply for outgoing electronic commerce activities. (See article 3(3) and Annex, fourth indent of the Electronic Commerce Directive; Annex to European Commission Discussion Paper MARKT/2541/03) | |
7.4 | G | In the FSA's view, the Directive's effect on the territorial scope of this sourcebook (including the use of the 'insurance derogation'): | |
(1) | is in line with the Distance Marketing Directive; and | ||
(2) | overrides that of any other Directive discussed in this Annex to the extent that it is incompatible. | ||
7.5 | G | The 'derogations' in the Directive may enable other EEA States to adopt a different approach to the United Kingdom in certain fields. (See recital 19 of the Insurance Mediation Directive, recital 6 of the Distance Marketing Directive, article 3 and Annex of the Electronic Commerce Directive) | |
8. | Investor Compensation Directive | ||
8.1 | G | (1) | The Investor Compensation Directive generally requires MiFID investment firms to belong to a compensation scheme established in accordance with the Directive. The rules in this sourcebook that implement the Directive are those (i) requiring MiFID investment firms, including their branches, to make available specified information about the compensation scheme to which they belong and specifying the language in which such information must be provided (COBS 6.1.16 R) and (ii) restricting mention of the compensation scheme in advertising to factual references (COBS 4.2.5 G). |
(2) | In the FSA's view, these matters are a Home State responsibility although a Host State may continue to apply its own rules in the 'general good'. Accordingly, these rules apply to the establishments of a UK MiFID investment firm in the United Kingdom and another EEA State but also apply in accordance with their standard territorial scope to an EEA MiFID investment firm providing services in the UK unless its Home State applies rules of like effect. | ||
9. | UCITS Directive: effect on territorial scope | ||
9.1 | G | The UCITS Directive covers undertakings for collective investment in transferable securities (UCITS)meeting the requirements of the Directive, and their management companies and depositaries.The rules in this sourcebook within the Directive's scope (all of which will apply to a management company) are those in: | |
(1) | COBS 2.1 (Acting honestly, fairly and professionally); | ||
(2) | COBS 2.3 (Inducements); | ||
(3) | COBS 4.2.1 R (The fair, clear and not misleading rule); | ||
(4) | COBS 4.3.1 R (Financial promotions to be identifiable as such); | ||
(5) | COBS 4.13 (UCITS); | ||
(6) | COBS 11.2 (Best execution); | ||
(7) | COBS 11.3 (Client order handling); | ||
(8) | COBS 11.7 (Personal account dealing); | ||
(9) | COBS 14 (Providing product information to clients) relating to the provision of key investor information by the management company (in addition to applying to a management company, COBS 14.2 also applies to an ICVC that is a UCITS scheme); and | ||
(10) | COBS 16.2 (Occasional reporting). | ||
9.1A | G | The majority of the COBS rules referred to in paragraph 9.1 are rules of conduct which each EEA State must draw up under article 14.1 of the UCITS Directive which management companies authorised in that State must observe at all times. The exceptions are COBS 4 and COBS 14 in so far as they relate to a UCITS scheme, which form part of the FSA's fund application rules and which are the responsibility of the UCITS Home State (for a UCITS scheme, the FSA - see COLL 12.3.5 R (COLL fund rules under the management company passport: the fund application rules) and article 19 of the UCITS Directive). | |
9.1B | G | Where a management company is providing collective portfolio management services for a UCITS established in a different EEA State, responsibility for its compliance with the applicable rules of conduct drawn up under article 14 will generally be for the management company's Home State, but when a branch is established it will be the responsibility of the Host Member State (UCITS Home State) (see articles 17(4) and 17(5) of the UCITS Directive). | |
9.1C | G | Under the UCITS Directive certain Host State marketing and MiFID-specific rules might also apply to a management company providing collective portfolio management services for a UCITS established in a different EEA State. Consequently, an EEA UCITS management company should note that, under COBS, certain of the FSA's rules apply to it, including the financial promotion rules. COBS 4.13 (UCITS) is concerned with marketing communications for UCITS schemes and EEA UCITS schemes. | |
9.1D | G | EEA UCITS management companies should be aware that there is a special narrower application of COBS for scheme management activity provided for by COBS 18.5 (Operators of collective investment schemes). | |
9.2 | G | [deleted] | |
9.3 | G | The Directive does not affect the territorial scope of rules as they apply to an intermediary (that is not a management company) selling units of a UCITS. | |
[Note: articles 12, 14, 17, 18, 19 and 94 of the UCITS Directive] |
COBS 2
Conduct of business obligations
COBS 2.1
Acting honestly, fairly and professionally
- 01/11/2007
The client's best interests rule
COBS 2.1.1
See Notes
- (1) A firm must act honestly, fairly and professionally in accordance with the best interests of its client (the client's best interests rule).
- (2) This rule applies in relation to designated investment business carried on:
- (a) for a retail client; and
- (b) in relation to MiFID or equivalent third country business, for any other client.
- (3) For a management company, this rule applies in relation to any UCITS scheme or EEA UCITS scheme the firm manages.
[Note: article 19(1) of MiFID]and article 14(1)(a) and (b) of the UCITS Directive]
- 01/07/2011
- Past version of COBS 2.1.1 before 01/07/2011
Exclusion of liability
COBS 2.1.2
See Notes
A firm must not, in any communication relating to designated investment business seek to:
- (1) exclude or restrict; or
- (2) rely on any exclusion or restriction of;
any duty or liability it may have to a client under the regulatory system.
- 01/11/2007
COBS 2.1.3
See Notes
- (1) In order to comply with the client's best interests rule, a firm should not, in any communication to a retail client relating to designated investment business:
- (a) seek to exclude or restrict; or
- (b) rely on any exclusion or restriction of;
- any duty or liability it may have to a client other than under the regulatory system, unless it is honest, fair and professional for it to do so.
- (2) The general law, including the Unfair Terms Regulations, also limits the scope for a firm to exclude or restrict any duty or liability to a consumer.
- 01/11/2007
COBS 2.2
Information disclosure before providing services
- 01/11/2007
Application
COBS 2.2.-1
See Notes
- (1) This section applies in relation to MiFID or equivalent third country business.
- (2) This section applies in relation to other designated investment business carried on for a retail client:
- (a) in relation to a derivative, a warrant or stock lending activity, but as regards the matters in COBS 2.2.1R (1)(b) only; and
- (b) in relation to a packaged product , but as regards the matters in COBS 2.2.1R (1)(a) and (d) only.
[Note: article 19(3) of MiFID]
Information disclosure before providing services
COBS 2.2.1
See Notes
- (1) A firm must provide appropriate information in a comprehensible form to a client about:
- (a) the firm and its services;
- (b) designated investments and proposed investment strategies; including appropriate guidance on and warnings of the risks associated with investments in those designated investments or in respect of particular investment strategies;
- (c) execution venues; and
- (d) costs and associated charges;
- so that the client is reasonably able to understand the nature and risks of the service and of the specific type of designated investment that is being offered and, consequently, to take investment decisions on an informed basis.
- (2) That information may be provided in a standardised format.
- (3) [deleted]
- (4) [deleted]
[Note: article 19(3) of MiFID]
- 06/08/2008
- Past version of COBS 2.2.1 before 06/08/2008
COBS 2.2.2
See Notes
- 01/11/2007
Disclosure of commitment to the Financial Reporting Council's Stewardship Code
COBS 2.2.3
See Notes
A firm, other than a venture capital firm, which is managing investments for a professional client that is not a natural person must disclose clearly on its website, or if it does not have a website in another accessible form:
- (1) the nature of its commitment to the Financial Reporting Council's Stewardship Code; or
- (2) where it does not commit to the Code, its alternative investment strategy.
- 06/12/2010
COBS 2.3
Inducements
- 01/11/2007
Rule on inducements
COBS 2.3.1
See Notes
A firm must not pay or accept any fee or commission, or provide or receive any non-monetary benefit, in relation to designated investment business or, in the case of its MiFID or equivalent third country business, another ancillary service, carried on for a client other than:
- (1) a fee, commission or non-monetary benefit paid or provided to or by the client or a person on behalf of the client; or
- (2) a fee, commission or non-monetary benefit paid or provided to or by a third party or a person acting on behalf of a third party, if:
- (a) the payment of the fee or commission, or the provision of the non-monetary benefit does not impair compliance with the firm's duty to act in the best interests of the client; and
- (b) the existence, nature and amount of the fee, commission or benefit, or, where the amount cannot be ascertained, the method of calculating that amount, is clearly disclosed to the client, in a manner that is comprehensive, accurate and understandable, before the provision of the service;
- (i) this requirement only applies to business other than MiFID or equivalent third country business if it includes giving a personal recommendation in relation to a packaged product;
- (ii) where this requirement applies to business other than MiFID or equivalent third country business, a firm is not required to make a disclosure to the client in relation to a non-monetary benefit permitted under (a) and which falls within the table of reasonable non-monetary benefits in COBS 2.3.15 G as though that table were part of this rule for this purpose only;
- (iii) this requirement does not apply to a firm giving basic advice; and
- (c) in relation to MiFID or equivalent third country business, the payment of the fee or commission, or the provision of the non-monetary benefit is designed to enhance the quality of the service to the client; or
- (3) proper fees which enable or are necessary for the provision of designated investment business or ancillary services, such as custody costs, settlement and exchange fees, regulatory levies or legal fees, and which, by their nature, cannot give rise to conflicts with the firm's duties to act honestly, fairly and professionally in accordance with the best interests of its clients.
COBS 2.3.1A
See Notes
COBS 2.3.1 R applies to a UK UCITS management company and EEA UCITS management company when providing collective portfolio management services, as if:
- (1) references to a client, were references to any UCITS it manages; and
- (2) in (2)(b) and (c) and (3) of that rule, references to MiFID or equivalent third country business were also references to the collective portfolio management activities of investment management and administration for the scheme.
[Note: article 29(1) of the UCITS implementing Directive]
- 01/07/2011
COBS 2.3.2
See Notes
A firm will satisfy the disclosure obligation under this section if it:
- (1) discloses the essential arrangements relating to the fee, commission or non-monetary benefit in summary form;
- (2) undertakes to the client that further details will be disclosed on request; and
- (3) honours the undertaking in (2).
[Note: article 26 of the MiFID implementing Directive and article 29(2) of the UCITS implementing Directive]
- 01/07/2011
- Past version of COBS 2.3.2 before 01/07/2011
COBS 2.3.2A
See Notes
COBS 2.3.2 R applies to a UK UCITS management company and EEA UCITS management company when providing collective portfolio management services, as if references to a client were references to a unitholder of the scheme.
[Note: article 29(2) of the UCITS implementing Directive]
- 01/07/2011
Guidance on inducements
COBS 2.3.3
See Notes
- 01/11/2007
COBS 2.3.4
See Notes
- 01/11/2007
COBS 2.3.5
See Notes
- 01/11/2007
COBS 2.3.6
See Notes
For the purposes of this section, the receipt by an investment firm of a commission in connection with a personal recommendation or a general recommendation, in circumstances where the advice or recommendation is not biased as a result of the receipt of commission, should be considered as designed to enhance the quality of the recommendation to the client.
[Note: recital 39 of MiFID implementing Directive]
- 01/11/2007
COBS 2.3.7
See Notes
- 01/11/2007
COBS 2.3.8
See Notes
- 01/11/2007
Packaged products evidential provisions and guidance on inducements
COBS 2.3.9
See Notes
COBS 2.3.10
See Notes
- (1) If a firm is required to disclose commission (see COBS 6.4) to a client in relation to the sale of a packaged product (other than in relation to arrangements between firms that are in the same immediate group) the firm should not enter into any of the following:
- (a) volume overrides, if commission paid in respect of several transactions is more than a simple multiple of the commission payable in respect of one transaction of the same kind; and
- (b) an agreement to indemnify the payment of commission on terms that would or might confer an additional financial benefit on the recipient in the event of the commission becoming repayable.
- (2) Contravention of (1) may be relied upon as tending to establish contravention of the rule on inducements (COBS 2.3.1 R).
- 01/11/2007
COBS 2.3.11
See Notes
- (1) If a firm enters into an arrangement with another firm under which it makes or receives a payment of commission in relation to the sale of a packaged product that is increased in excess of the amount disclosed to the client, the firm is likely to have breached the rules on disclosure of charges, remuneration and commission (see COBS 6.4) and, where applicable, the rule on inducements in COBS 2.3.1R (2)(b), unless the increase is attributable to an increase in the premiums or contributions payable by that client.
- 01/11/2007
COBS 2.3.12
See Notes
- (1) This evidential provision applies in relation to a holding in, or the provision of credit to, a firm which holds itself out as making personal recommendations to retail clients on packaged products, except where the relevant transaction is between persons who are in the same immediate group.
- (2) A product provider should not take any step which would result in it:
- (a) having a direct or indirect holding of the capital or voting power of a firm in (1); or
- (b) providing credit to a firm in (1) (other than commission due from the firm to the product provider in accordance with an indemnity commission clawback arrangement);
- unless all the conditions in (4) are satisfied. A product provider should also take reasonable steps to ensure that its associates do not take any step which would result in it having a holding as in (a) or providing credit as in (b).
- (3) A firm in (1) should not take any step which would result in a product provider having a holding as in (2)(a) or providing credit as in paragraph (2)(b), unless all the conditions in (4) are satisfied.
- (4) The conditions referred to in (2) and (3) are that:
- (a) the holding is acquired, or credit is provided, on commercial terms, that is terms objectively comparable to those on which an independent person unconnected to a product provider would, taking into account all relevant circumstances, be willing to acquire the holding or provide credit;
- (b) the firm (or, if applicable, each of the firms) taking the step has reliable written evidence that (a) is satisfied;
- (c) there are no arrangements, in connection with the holding or credit, relating to the channelling of business from the firm in (1) to the product provider; and
- (d) the product provider is not able, and none of its associates is able, because of the holding or credit, to exercise any influence over the personal recommendations made in relation to packaged products given by the firm.
- (5) In this evidential provision, in applying (2) and (3) any holding of, or credit provided by, a product provider's associate is to be regarded as held by, or provided by, that product provider.
- (6) In this evidential provision, in applying (3) references to a "product provider" are to be taken as including an unauthorised equivalent of a product provider; that is, an unauthorised insurance undertaking or an unauthorised operator of a regulated collective investment scheme or of an investment trust savings scheme;
- (7) Contravention of (2) or (3) may be relied upon as tending to establish contravention of the rule on inducements (COBS 2.3.1 R).
COBS 2.3.13
See Notes
- 01/11/2007
Reasonable non-monetary benefits
COBS 2.3.14
See Notes
- (1) In relation to the sale of packaged products , the table on reasonable non-monetary benefits (COBS 2.3.15 G) indicates the kind of benefits which are capable of enhancing the quality of the service provided to a client and, depending on the circumstances, are capable of being paid or received without breaching the client's best interests rule. However, in each case, it will be a question of fact whether these conditions are satisfied.
- (2) The guidance in the table on reasonable non-monetary benefits is not relevant to non-monetary benefits which may be given by a product provider or its associate to its own representatives. The guidance in this provision does not apply directly to non-monetary benefits provided by a firm to another firm that is in the same immediate group. In this situation, the rules on commission equivalent (COBS 6.4.3 R) will apply.
Reasonable non-monetary benefits
COBS 2.3.15
See Notes
Reasonable non-monetary benefits | |||
Gifts, Hospitality and Promotional Competition Prizes | |||
1 | A product provider giving and a firm receiving gifts, hospitality and promotional competition prizes of a reasonable value. | ||
Promotion | |||
2 | A product provider assisting another firm to promote its packaged products so that the quality of its service to clients is enhanced. Such assistance should not be of a kind or value that is likely to impair the recipient firm's ability to pay due regard to the interests of its clients, and to give advice on, and recommend, packaged products available from the recipient firm's whole range or ranges. | ||
Joint marketing exercises | |||
3 | A product provider providing generic product literature (that is, letter heading, leaflets, forms and envelopes) that is suitable for use and distribution by or on behalf of another firm if: | ||
(a) | the literature enhances the quality of the service to the client and is not primarily of promotional benefit to the product provider; and | ||
(b) | the total costs (for example, packaging, posting, mailing lists) of distributing such literature to its client are borne by the recipient firm. | ||
4 | A product provider supplying another firm with 'freepost' envelopes, for forwarding such items as completed applications, medical reports or copy client agreements. | ||
5 | A product provider supplying product specific literature (for example, key features documents, minimum information) to another firm if: | ||
(a) | the literature does not contain the name of any other firm; or | ||
(b) | if the name of the recipient firm is included, the literature enhances the quality of the service to the client and is not primarily of promotional benefit to the recipient firm. | ||
6 | A product provider supplying draft articles, news items and financial promotions for publication in another firm's magazine, only if in each case any costs paid by the product provider for placing the articles and financial promotions are not more than market rate, and exclude distribution costs. | ||
Seminars and conferences | |||
7 | A product provider taking part in a seminar organised by another firm or a third party and paying toward the cost of the seminar, if: | ||
(a) | its participation is for a genuine business purpose; and | ||
(b) | the contribution is reasonable and proportionate to its participation and by reference to the time and sessions at the seminar when its staff play an active role. | ||
Technical services and information technology | |||
8 | A product provider supplying a 'freephone' link to which it is connected. | ||
9 | A product provider supplying another firm with any of the following: | ||
(a) | quotations and projections relating to its packaged products and, in relation to specific investment transactions (or for the purpose of any scheme for review of past business), advice on the completion of forms or other documents; | ||
(b) | access to data processing facilities, or access to data, that is related to the product provider's business; | ||
(c) | access to third party electronic dealing or quotation systems that are related to the product provider's business; and | ||
(d) | software that gives information about the product provider's packaged products or which is appropriate to its business (for example, for use in a scheme for review of past business or for producing projections or technical product information). | ||
10 | A product provider paying cash amounts or giving other assistance to a firm not in the same immediate group for the development of software or other computer facilities necessary to operate software supplied by the product provider , but only to the extent that by doing so it will generate equivalent cost savings to itself or clients. | ||
11 | A product provider supplying another firm with information about sources of mortgage finance. | ||
12 | A product provider supplying another firm with generic technical information in writing, not necessarily related to the product provider's business, when this information states clearly and prominently that it is produced by the product provider or (if different) supplying firm. | ||
Training | |||
13 | A product provider providing another firm with training facilities of any kind (for example, lectures, venue, written material and software). | ||
Travel and accommodation expenses | |||
14 | A product provider reimbursing another firm's reasonable travel and accommodation expenses when the other firm: | ||
(a) | participates in market research conducted by or for the product provider; | ||
(b) | attends an annual national event of a United Kingdom trade association, hosted or co-hosted by the product provider; | ||
(c) | participates in the product provider's training facilities (see 13); | ||
(d) | visits the product provider's United Kingdom office in order to: | ||
(i) | receive information about the product provider's administrative systems; or | ||
(ii) | attend a meeting with the product provider and an existing or prospective client of the receiving firm. |
COBS 2.3.16
See Notes
Record keeping: inducements
COBS 2.3.17
See Notes
- (1) A firm must make a record of the information disclosed to the client in accordance with COBS 2.3.1R (2)(b) and must keep that record for at least five years from the date on which it was given.
- (2) A firm must also make a record of each benefit given to another firm which does not have to be disclosed to the client in accordance with COBS 2.3.1R (2)(b)(ii), and must keep that record for at least five years from the date on which it was given.
[Note: see article 51(3) of the MiFID implementing Directive]
COBS 2.4
Agent as client and reliance on others
- 01/11/2007
COBS 2.4.1
See Notes
- 01/11/2007
COBS 2.4.2
See Notes
- 06/02/2008
- Past version of COBS 2.4.2 before 06/02/2008
Agent as client
COBS 2.4.3
See Notes
- (1) If a firm (F) is aware that a person (C1) with or for whom it is providing services is acting as agent for another person (C2) in relation to those services, C1, and not C2, is the client of F in respect of that business.
- (2) Paragraph (1) does not apply if:
- (a) F has agreed with C1 in writing to treat C2 as its client; or
- (b) C1 is neither a firm nor an overseas financial services institution and the main purpose of the arrangements between the parties is the avoidance of duties that F would otherwise owe to C2.
- If this is the case, C2 is the client of F in respect of that business and C1 is not.
- (3) If there is an agreement under (2)(a) in relation to more than one C2 represented by C1, F may discharge any requirement to notify, obtain consent from, or enter into an agreement with each C2 by sending to, or receiving from, C1 a single communication expressed to cover each C2, except that the following will be required for each C2:
- (a) separate risk warnings required under this sourcebook;
- (b) separate confirmations under the requirements on occasional reporting (COBS 16.3); and
- (c) separate periodic statements.
- 01/11/2007
Reliance on other investment firms: MiFID and equivalent business
COBS 2.4.4
See Notes
- (1) This rule applies if a firm (F1), in the course of performing MiFID or equivalent third country business, receives an instruction to perform an investment or ancillary service on behalf of a client (C) through another firm (F2), if F2 is:
- (a) a MiFID investment firm or a third country investment firm; or
- (b) an investment firm that is:
- (2) F1 may rely upon:
- (a) any information about C transmitted to it by F2; and
- (b) any recommendations in respect of the service or transaction that have been provided to C by F2.
- (3) F2 will remain responsible for:
- (a) the completeness and accuracy of any information about C transmitted by it to F1; and
- (b) the appropriateness for C of any advice or recommendations provided to C.
- (4) F1 will remain responsible for concluding the services or transaction based on any such information or recommendations in accordance with the applicable requirements under the regulatory system.
[Note: article 20 of MiFID]
- 01/11/2007
COBS 2.4.5
See Notes
- (1) If F1 is required to perform a suitability assessment or an appropriateness assessment under COBS 9 or COBS 10, it may rely upon a suitability assessment performed by F2, if F2 was subject to the requirements for assessing suitability in COBS 9 (excluding the basic advice rules) or equivalent requirements in another EEA State in performing that assessment.
- (2) If F1 is required to perform an appropriateness assessment under COBS 10, it may rely upon an appropriateness assessment performed by F2, if F2 was subject to the requirements for assessing appropriateness in COBS 10.2 or equivalent requirements in another EEA State in performing that assessment.
- 01/11/2007
Reliance on others: other situations
COBS 2.4.6
See Notes
- (1) This rule applies if the rule on reliance on other investment firms (COBS 2.4.4 R) does not apply.
- (2) A firm will be taken to be in compliance with any rule in this sourcebook that requires it to obtain information to the extent it can show it was reasonable for it to rely on information provided to it in writing by another person.
- 01/11/2007
COBS 2.4.7
See Notes
- (1) In relying on COBS 2.4.6 R, a firm should take reasonable steps to establish that the other person providing written information is not connected with the firm and is competent to provide the information.
- (2) Compliance with (1) may be relied upon as tending to establish compliance with COBS 2.4.6 R.
- (3) Contravention of (1) may be relied upon as tending to establish contravention of COBS 2.4.6 R.
- 01/11/2007
COBS 2.4.8
See Notes
- 01/11/2007
COBS 2.4.9
See Notes
- 01/11/2007
COBS 2.4.10
See Notes
- 01/11/2007
COBS 3
Client categorisation
COBS 3.1
Application
- 01/11/2007
Scope
COBS 3.1.1
See Notes
- 01/11/2007
COBS 3.1.2
See Notes
- 01/11/2007
COBS 3.1.3
See Notes
The sections in this chapter on general notifications (COBS 3.3) and policies, procedures and records (COBS 3.8) do not apply in relation to a firm that is neither:
- (1) conducting designated investment business; nor
- (2) in the case of MiFID or equivalent third country business providing an ancillary service that does not constitute designated investment business.
- 01/11/2007
Mixed business
COBS 3.1.4
See Notes
If a firm conducts business for a client involving both:
- (1) MiFID or equivalent third country business; and
- (2) other regulated activities subject to this chapter;
it must categorise that client for such business in accordance with the provisions in this chapter that apply to MiFID or equivalent third country business.
- 01/11/2007
COBS 3.1.5
See Notes
- (1) For example, the requirement concerning mixed business will apply if a MiFID investment firm advises a client on whether to invest in a scheme or a life policy. This is because the former is within the scope of MiFID and the latter is not. In such a case, the MiFID client categorisation requirements prevail.
- (2) The requirement does not apply where the MiFID or equivalent third country business is provided separately from the other regulated activities. Where this is the case, in accordance with Principle 7 (communications with clients) the basis on which the different activities will be performed, including any differences in the categorisations that apply, should be made clear to the client.
- 01/11/2007
COBS 3.2
Clients
- 01/11/2007
General definition
COBS 3.2.1
See Notes
- (1) A person to whom a firm provides, intends to provide or has provided:
- (a) a service in the course of carrying on a regulated activity; or
- (b) in the case of MiFID or equivalent third country business, an ancillary service,
- is a "client" of that firm;
- (2) A "client" includes a potential client.
- (3) In relation to the financial promotion rules, a person to whom a financial promotion is or is likely to be communicated is a "client" of a firm that communicates or approves it.
- (4) A client of an appointed representative or, if applicable, a tied agent is a "client" of the firm for whom that appointed representative, or tied agent, acts or intends to act in the course of business for which that firm has accepted responsibility under the Act or MiFID (see sections 39 and 39A of the Act and SUP 12.3.5 R).
[Note: article 4(1)(10) of MiFID]
- 01/11/2007
COBS 3.2.2
See Notes
- (1) A corporate finance contact or a venture capital contact is not a client under the first limb of the general definition. This is because a firm does not provide a service to such a contact. However, it will be a client under the third limb of the general definition for the purposes of the financial promotion rules if the firm communicates or approves a financial promotion that is or is likely to be communicated to such a contact.
- (2) Communicating or approving a financial promotion that is or is likely to be communicated to such a contact is not MiFID or equivalent third country business. In such circumstances, the "non-MiFID" client categorisations are relevant and, in categorising elective professional clients, the "quantitative test" will not need to be satisfied.
- 06/08/2008
- Past version of COBS 3.2.2 before 06/08/2008
Who is the client?
COBS 3.2.3
See Notes
- (1) If a firm provides services to a person that is acting as an agent, the identity of its client will be determined in accordance with the rule on agents as clients (see COBS 2.4.3 R).
- (2) In relation to a firm establishing, operating or winding up a personal pension scheme or a stakeholder pension scheme, a member or beneficiary of that scheme is a client of the firm.
- (3) If a firm that does not fall within (2) provides services to a person that is acting as the trustee of a trust, that person will be the firm's client and the underlying beneficiaries of the trust will not.
- (4) In relation to business that is neither MiFID or equivalent third country business, if a firm provides services to a collective investment scheme that does not have separate legal personality, that collective investment scheme will be the firm's client.
- (5) If a firm provides services relating to a contribution to or interest in a CTF (except for a personal recommendation relating to a contribution to a CTF or in relation to the communication or approval of a financial promotion), the firm's only client is:
- (a) the registered contact, if there is one;
- (b) otherwise, the person to whom the statement must be sent in accordance with Regulation 10 of the CTF Regulations.
- 06/04/2011
- Past version of COBS 3.2.3 before 06/04/2011
COBS 3.3
General notifications
- 01/11/2007
COBS 3.3.1
See Notes
A firm must:
- (1) notify a new client of its categorisation as a retail client, professional client, or eligible counterparty in accordance with this chapter; and
- (2) prior to the provision of services, inform a client in a durable medium about:
[Note: paragraph 2 of section I of annex II to MiFID and articles 28(1) and (2) and the second paragraph of article 50(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.3.2
See Notes
- 01/11/2007
COBS 3.4
Retail clients
- 01/11/2007
COBS 3.4.1
See Notes
A retail client is a client who is not a professional client or an eligible counterparty.
[Note: article 4(1)(12) of MiFID]
- 01/11/2007
COBS 3.4.2
See Notes
- 01/11/2007
COBS 3.5
Professional clients
- 01/11/2007
COBS 3.5.1
See Notes
A professional client is a client that is either a per se professional client or an elective professional client.
[Note: article 4(1)(11) of MiFID]
- 01/11/2007
Per se professional clients
COBS 3.5.2
See Notes
Each of the following is a per se professional client unless and to the extent it is an eligible counterparty or is given a different categorisation under this chapter:
- (1) an entity required to be authorised or regulated to operate in the financial markets. The following list includes all authorised entities carrying out the characteristic activities of the entities mentioned, whether authorised by an EEA State or a third country and whether or not authorised by reference to a directive:
- (a) a credit institution;
- (b) an investment firm;
- (c) any other authorised or regulated financial institution;
- (d) an insurance company;
- (e) a collective investment scheme or the management company of such a scheme;
- (f) a pension fund or the management company of a pension fund;
- (g) a commodity or commodity derivatives dealer;
- (h) a local;
- (i) any other institutional investor;
- (2) in relation to MiFID or equivalent third country business a large undertaking meeting two of the following size requirements on a company basis:
- (a) balance sheet total of EUR 20,000,000;
- (b) net turnover of EUR 40,000,000;
- (c) own funds of EUR 2,000,000;
- (3) in relation to business that is not MiFID or equivalent third country business a large undertaking meeting any of the following conditions:
- (a) a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) (or has had at any time during the previous two years) called up share capital or net assets of at least £5 million (or its equivalent in any other currency at the relevant time);
- (b) an undertaking that meets (or any of whose holding companies or subsidiaries meets) two of the following tests:
- (i) a balance sheet total of EUR 12,500,000;
- (ii) a net turnover of EUR 25,000,000;
- (iii) an average number of employees during the year of 250;
- (c) a partnership or unincorporated association which has (or has had at any time during the previous two years) net assets of at least £5 million (or its equivalent in any other currency at the relevant time) and calculated in the case of a limited partnership without deducting loans owing to any of the partners;
- (d) a trustee of a trust (other than an occupational pension scheme, SSAS, personal pension scheme or stakeholder pension scheme) which has (or has had at any time during the previous two years) assets of at least £10 million (or its equivalent in any other currency at the relevant time) calculated by aggregating the value of the cash and designated investments forming part of the trust's assets, but before deducting its liabilities;
- (e) a trustee of an occupational pension scheme or SSAS, or a trustee or operator of a personal pension scheme or stakeholder pension scheme where the scheme has (or has had at any time during the previous two years):
- (i) at least 50 members; and
- (ii) assets under management of at least £10 million (or its equivalent in any other currency at the relevant time);
- (f) a local authority or public authority.
- (4) a national or regional government, a public body that manages public debt, a central bank, an international or supranational institution (such as the World Bank, the IMF, the ECP, the EIB) or another similar international organisation;
- (5) another institutional investor whose main activity is to invest in financial instruments (in relation to the firm's MiFID or equivalent third country business) or designated investments (in relation to the firm's other business). This includes entities dedicated to the securitisation of assets or other financing transactions.
[Note: first paragraph of section I of annex II to MiFID]
- 01/11/2007
COBS 3.5.2A
See Notes
Elective professional clients
COBS 3.5.3
See Notes
A firm may treat a client as an elective professional client if it complies with (1) and (3) and, where applicable, (2):
- (1) the firm undertakes an adequate assessment of the expertise, experience and knowledge of the client that gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the client is capable of making his own investment decisions and understanding the risks involved (the "qualitative test");
- (2) in relation to MiFID or equivalent third country business in the course of that assessment, at least two of the following criteria are satisfied:
- (a) the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
- (b) the size of the client's financial instrument portfolio, defined as including cash deposits and financial instruments, exceeds EUR 500,000;
- (c) the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged;
- (the "quantitative test"); and
- (3) the following procedure is followed:
- (a) the client must state in writing to the firm that it wishes to be treated as a professional client either generally or in respect of a particular service or transaction or type of transaction or product;
- (b) the firm must give the client a clear written warning of the protections and investor compensation rights the client may lose; and
- (c) the client must state in writing, in a separate document from the contract, that it is aware of the consequences of losing such protections.
[Note: first, second, third and fifth paragraphs of section II.1 and first paragraph of section II.2 of annex II to MiFID]
- 01/11/2007
COBS 3.5.4
See Notes
- 01/11/2007
COBS 3.5.5
See Notes
The fitness test applied to managers and directors of entities licensed under directives in the financial field is an example of the assessment of expertise and knowledge involved in the qualitative test.
[Note: fourth paragraph of section II.1 of annex II to MiFID]
- 01/11/2007
COBS 3.5.6
See Notes
Before deciding to accept a request for re-categorisation as an elective professional client a firm must take all reasonable steps to ensure that the client requesting to be treated as an elective professional client satisfies the qualitative test and, where applicable, the quantitative test.
[Note: second paragraph of section II.2 of annex II to MiFID]
- 01/11/2007
COBS 3.5.7
See Notes
An elective professional client should not be presumed to possess market knowledge and experience comparable to a per se professional client
[Note: second paragraph of section II.1 of annex II to MiFID]
- 01/11/2007
COBS 3.5.8
See Notes
Professional client are responsible for keeping the firm informed about any change that could affect their current categorisation.
[Note: fourth paragraph of section II.2 of annex II to MiFID]
- 01/11/2007
COBS 3.5.9
See Notes
- (1) If a firm becomes aware that a client no longer fulfils the initial conditions that made it eligible for categorisation as an elective professional client, the firm must take the appropriate action.
- (2) Where the appropriate action involves re-categorising that client as a retail client, the firm must notify that client of its new categorisation.
[Note: fourth paragraph of section II.2 of annex II to MiFID and article 28(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.6
Eligible counterparties
- 01/11/2007
COBS 3.6.1
See Notes
- (1) An eligible counterparty is a client that is either a per se eligible counterparty or an elective eligible counterparty.
- (2) A client can only be an eligible counterparty in relation to eligible counterparty business (PRIN 1 Annex 1 R is an exception to this).
[Note: article 24(1) of MiFID]
- 01/11/2007
Per se eligible counterparties
COBS 3.6.2
See Notes
Each of the following is a per se eligible counterparty (including an entity that is not from an EEA state that is equivalent to any of the following) unless and to the extent it is given a different categorisation under this chapter:
- (1) an investment firm;
- (2) a credit institution;
- (3) an insurance company;
- (4) a collective investment scheme authorised under the UCITS Directive or its management company;
- (5) a pension fund or its management company;
- (6) another financial institution authorised or regulated under EU legislation or the national law of an EEA State;
- (7) an undertaking exempted from the application of MiFID under either Article 2(1)(k) (certain own account dealers in commodities or commodity derivatives) or Article 2(1)(l) (locals) of that directive;
- (8) a national government or its corresponding office, including a public body that deals with the public debt;
- (9) a central bank;
- (10) a supranational organisation.
[Note: first paragraph of article 24(2) and first paragraph of article 24(4) of MiFID]
- 01/12/2009
- Past version of COBS 3.6.2 before 01/12/2009
COBS 3.6.3
See Notes
- 01/11/2007
Elective eligible counterparties
COBS 3.6.4
See Notes
A firm may treat a client as an elective eligible counterparty if:
- (1) the client is an undertaking and:
- (a) is a per se professional client (except for a client that is only a per se professional client because it is an institutional investor under COBS 3.5.2 R (5)) and, in relation to business other than MiFID or equivalent third country business:
- (i) is a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) called up share capital of at least £10 million (or its equivalent in any other currency at the relevant time); or
- (ii) meets the criteria in the rule on meeting two quantitative tests (COBS 3.5.2 R (3)(b)); or
- (b) requests such categorisation and is an elective professional client, but only in respect of the services or transactions for which it could be treated as a professional client; and
- (2) the firm has, in relation to MiFID or equivalent third country business, obtained express confirmation from the prospective counterparty that it agrees to be treated as an eligible counterparty.
[Note: article 24(3) and the second paragraph of article 24(4) of MiFID and article 50(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.6.5
See Notes
- 01/11/2007
COBS 3.6.6
See Notes
A firm may obtain a prospective counterparty's confirmation that it agrees to be treated as an eligible counterparty either in the form of a general agreement or in respect of each individual transaction.
[Note: second paragraph of article 24(3) of MiFID]
- 01/11/2007
Client and firm located in different jurisdictions
COBS 3.6.7
See Notes
In the case of MiFID or equivalent third country business, in the event of a transaction where the prospective counterparties are located in different EEA States, the firm shall defer to the status of the other undertaking as determined by the law or measures of the EEA State in which that undertaking is established.
[Note: first paragraph of article 24(3) of MiFID]
- 01/11/2007
COBS 3.7
Providing clients with a higher level of protection
- 01/11/2007
COBS 3.7.1
See Notes
A firm must allow a professional client or an eligible counterparty to request re-categorisation as a client that benefits from a higher degree of protection.
[Note: second paragraph of article 24(2) of, and the second paragraph of section I of annex II to, MiFID and the second paragraph of article 50(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.7.2
See Notes
It is the responsibility of a professional client or eligible counterparty to ask for a higher level of protection when it deems it is unable to properly assess or manage the risks involved.
[Note: third paragraph of section I and fourth paragraph of section II.2 of annex II to MiFID and second paragraph of article 50(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.7.3
See Notes
A firm may, either on its own initiative or at the request of the client concerned:
- (1) treat as a professional client or a retail client a client that might otherwise be categorised as a per se eligible counterparty;
- (2) treat as a retail client a client that might otherwise be categorised as a per se professional client;
[Note: second paragraph of article 24(2) of, and second paragraph of section I of annex II to, MiFID and article 28(3) and the second paragraph of article 50(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.7.4
See Notes
If a per se eligible counterparty requests treatment as a client whose business with the firm is subject to conduct of business protections, but does not expressly request treatment as a retail client and the firm agrees to that request, the firm must treat that eligible counterparty as a professional client.
[Note: first paragraph of article 50(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.7.5
See Notes
- (1) If, in relation to MiFID or equivalent third country business a per se professional client or a per se eligible counterparty requests treatment as a retail client, the client will be classified as a retail client if it enters into a written agreement with the firm to the effect that it will not be treated as a professional client or eligible counterparty for the purposes of the applicable conduct of business regime.
- (2) This agreement must specify the scope of the re-categorisation, such as whether it applies to one or more particular services or transactions, to one or more types of product or transaction or to one or more rules.
[Note: fourth paragraph of section I of annex II to MiFID and second paragraph of article 50(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.7.6
See Notes
- (1) In accordance with Principle 7 (communications with clients) if a firm at its own initiative re-categorises a client in accordance with this section, it should notify that client of its new category under this section.
- (2) If the firm already has an agreement with the client, it should also consider any contractual requirements concerning the amendment of that agreement.
- 01/11/2007
COBS 3.7.7
See Notes
The ways in which a client may be provided with additional protections under this section include re-categorisation:
- (1) on a general basis; or
- (2) on a trade by trade basis; or
- (3) in respect of one or more specified rules; or
- (4) in respect of one or more particular services or transactions; or
- (5) in respect of one or more types of product or transaction.
[Note: second paragraph of article 24(2) of MiFID]
- 01/11/2007
COBS 3.7.8
See Notes
- 01/11/2007
COBS 3.8
Policies, procedures and records
- 01/11/2007
Policies and procedures
COBS 3.8.1
See Notes
- 01/11/2007
Records
COBS 3.8.2
See Notes
- (1) A firm must make a record of the form of each notice provided and each agreement entered into under this chapter. This record must be made at the time that standard form is first used and retained for the relevant period after the firm ceases to carry on business with clients who were provided with that form.
- (2) A firm must make a record in relation to each client of:
- (a) the categorisation established for the client under this chapter, including sufficient information to support that categorisation;
- (b) evidence of despatch to the client of any notice required under this chapter and if such notice differs from the relevant standard form, a copy of the actual notice provided; and
- (c) a copy of any agreement entered into with the client under this chapter.
- This record must be made at the time of categorisation and should be retained for the relevant period after the firm ceases to carry on business with or for that client.
- (3) The relevant periods are:
- (a) indefinitely, in relation to a pension transfer, pension opt-out or FSAVC;
- (b) at least five years, in relation to a life policy or pension contract;
- (c) five years in relation to MiFID or equivalent third country business; and
- (d) three years in any other case.
[Note: article 51(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 3.8.3
See Notes
- 01/11/2007
COBS 4
Communicating with clients, including financial promotions
COBS 4.1
Application
- 01/11/2007
Who? What?
COBS 4.1.1
See Notes
This chapter applies to a firm:
- (1) communicating with a client in relation to its designated investment business;
- (2) communicating or approving a financial promotion other than:
- (a) a financial promotion of qualifying credit, a home purchase plan or a home reversion plan; or
- (b) a financial promotion in respect of a non-investment insurance contract; or
- (c) a promotion of an unregulated collective investment scheme that would breach section 238(1) of the Act if made by an authorised person (firms may not communicate or approve such promotions).
- 01/11/2007
COBS 4.1.1A
See Notes
- 30/04/2011
COBS 4.1.2
See Notes
- (1) This chapter applies in relation to an authorised professional firm in accordance with COBS 18 (Specialist regimes).
- (2) This chapter applies, to a limited extent, in relation to communicating or approving a financial promotion that relates to a deposit if the deposit is a structured deposit, cash deposit ISA or cash deposit CTF.
- 06/08/2010
- Past version of COBS 4.1.2 before 06/08/2010
COBS 4.1.3
See Notes
A firm is required to comply with the financial promotion rules in relation to a financial promotion communicated by its appointed representative even where the financial promotion does not require approval because of the exemption in article 16 of the Financial Promotion Order (Exempt persons).
[Note: see section 39 of the Act]
- 01/11/2007
COBS 4.1.4
See Notes
- (1) In COBS 4.3.1 R, COBS 4.5.8 R and COBS 4.7.1 R, the defined terms "financial promotion" and "direct offer financial promotion" include, in relation to MiFID or equivalent third country business, all communications that are marketing communications within the meaning of MiFID.
- (2) In the case of MiFID or equivalent third country business, certain requirements in this chapter are subject to an exemption for the communication of a third party prospectus in certain circumstances. This has a similar effect to the exemption in article 70(1)(c) of the Financial Promotion Order, which is referred to in the definition of an excluded communication.
- (3) In this chapter "financial promotion" and "direct offer financial promotion" include communications that are marketing communications for the purposes of the UCITS Directive.
- 01/07/2011
- Past version of COBS 4.1.4 before 01/07/2011
COBS 4.1.5
See Notes
- (1) A firm communicating with an eligible counterparty should have regard to the application of COBS to eligible counterparty business (COBS 1 Annex 1 Part 1).
- (2) This chapter does not apply in relation to communicating with an eligible counterparty other than the section on compensation information (see COBS 4.4) but elements of the requirements in PRIN may apply.
- 01/11/2007
COBS 4.1.6
See Notes
- 06/08/2008
- Past version of COBS 4.1.6 before 06/08/2008
COBS 4.1.7
See Notes
A reference in this chapter to MiFID or equivalent third country business includes a reference to communications that occur before an agreement to perform services in relation to MiFID or equivalent third country business.
[Note: see recital 82 to the MiFID implementing Directive]
- 01/11/2007
Where? General position
COBS 4.1.8
See Notes
- (1) In relation to communications by a firm to a client in relation to its designated investment business this chapter applies in accordance with the general application rule and the rule on business with UK clients from an overseas establishment (COBS 1 Annex 1 Part 2 paragraph 2.1R).
- (2) In addition, the financial promotion rules apply to a firm in relation to:
- (a) the communication of a financial promotion to a person inside the United Kingdom;
- (b) the communication of a cold call to a person outside the United Kingdom, unless:
- (i) it is made from a place outside the United Kingdom; and
- (ii) it is made for the purposes of a business which is carried on outside the United Kingdom and which is not carried on in the United Kingdom; and
- (c) the approval of a financial promotion for communication to a person inside the United Kingdom.
- 01/11/2007
Where? Modifications to comply with EU law
COBS 4.1.9
See Notes
- (1) The EEA territorial scope rule modifies the general territorial scope of the rules in this chapter to the extent necessary to be compatible with European law. This means that in a number of cases, the rules in this chapter will apply to communications made by UK firms to persons located outside the United Kingdom and will not apply to communications made to persons inside the United Kingdom by EEA firms. Further guidance on this is located in COBS 1 Annex 1.
- (2) One effect of the EEA territorial scope rule is that the rules in this chapter will not generally apply to an EEA key investor information document but will, for example, apply to a firm (including an EEA UCITS management company) when marketing in the United Kingdom the units of an EEA UCITS scheme that is a recognised scheme.
- (3) The financial promotion rules do not apply to incoming communications in relation to the MiFID business of an investment firm from another EEA State that are, in its home member state, regulated under MiFID in another EEA State. For the purpose of article 36 of the Financial Promotion Order the FSA does not make any rules in relation to such incoming communications.
- 01/07/2011
- Past version of COBS 4.1.9 before 01/07/2011
COBS 4.1.10
See Notes
Firms should note the territorial scope of this chapter is also affected by:
- (1) the disapplication for financial promotions originating outside the United Kingdom that are not capable of having an effect within the United Kingdom (section 21(3) of the Act (Restrictions on financial promotion)) (see the defined term "excluded communication");
- (2) the exemptions for overseas communicators (see the defined term "excluded communication"); and
- (3) the rules on financial promotions with an overseas element (see COBS 4.9).
- 01/11/2007
COBS 4.2
Fair, clear and not misleading communications
- 01/11/2007
The fair, clear and not misleading rule
COBS 4.2.1
See Notes
- (1) A firm must ensure that a communication or a financial promotion is fair, clear and not misleading.
- (2) This rule applies in relation to:
- (a) a communication by the firm to a client in relation to designated investment business other than a third party prospectus;
- (b) a financial promotion communicated by the firm that is not:
- (i) an excluded communication;
- (ii) a non-retail communication;
- (iii) a third party prospectus; and
- (c) a financial promotion approved by the firm.
[Note: article 19(2) of MiFID, recital 52 to the MiFID implementing Directive and article 77 of the UCITS Directive]
- 01/07/2011
- Past version of COBS 4.2.1 before 01/07/2011
COBS 4.2.2
See Notes
- (1) The fair, clear and not misleading rule applies in a way that is appropriate and proportionate taking into account the means of communication and the information the communication is intended to convey. So a communication addressed to a professional client may not need to include the same information, or be presented in the same way, as a communication addressed to a retail client.
- (2) COBS 4.2.1R(2)(b) does not limit the application of the fair, clear and not misleading rule under COBS 4.2.1R (2) (a). So, for example, a communication in relation to designated investment business that is both a communication to a professional client and a financial promotion, will still be subject to the fair, clear and not misleading rule.
- 01/11/2007
COBS 4.2.3
See Notes
- 01/11/2007
Fair, clear and not misleading financial promotions
COBS 4.2.4
See Notes
A firm should ensure that a financial promotion:
- (1) for a product or service that places a client's capital at risk makes this clear;
- (2) that quotes a yield figure gives a balanced impression of both the short and long term prospects for the investment;
- (3) that promotes an investment or service whose charging structure is complex, or in relation to which the firm will receive more than one element of remuneration, includes the information necessary to ensure that it is fair, clear and not misleading and contains sufficient information taking into account the needs of the recipients;
- (4) that names the FSA as its regulator and refers to matters not regulated by the FSA makes clear that those matters are not regulated by the FSA;
- (5) that offers packaged products or stakeholder products not produced by the firm, gives a fair, clear and not misleading impression of the producer of the product or the manager of the underlying investments.
- 01/11/2007
The reasonable steps defence to an action for damages
COBS 4.2.6
See Notes
- 01/11/2007
COBS 4.3
Financial promotions to be identifiable as such
- 01/11/2007
COBS 4.3.1
See Notes
- (1) A firm must ensure that a financial promotion addressed to a client is clearly identifiable as such.
- [Note: article 19(2) of MiFID and article 77 of the UCITS Directive]
- (2) If a financial promotion relates to a firm's MiFID or equivalent third country business, this rule does not apply to the extent that the financial promotion is a third party prospectus.
- (3) If a financial promotion relates to a firm's business that is not MiFID or equivalent third country business, this rule applies to communicating or approving the financial promotion but does not apply:
- (a) to the extent that it is an excluded communication;
- (b) to the extent that it is a prospectus advertisement to which PR 3.3 applies;
- (c) if it is image advertising;
- (d) if it is a non-retail communication;
- (e) to the extent that it relates to a pure protection contract that is a long-term care insurance contract.
- (4) In the case of a marketing communication that relates to a UCITS scheme or an EEA UCITS scheme, (2) and (3) do not limit the application of this rule.
- 01/07/2011
- Past version of COBS 4.3.1 before 01/07/2011
COBS 4.4
Compensation information
- 01/11/2007
COBS 4.4.1
See Notes
A firm must ensure that any reference in advertising to an investor compensation scheme established under the Investor Compensation Directive is limited to a factual reference to the scheme.
[Note: article 10(3) of the Investor Compensation Directive]
- 01/11/2007
COBS 4.4.3
See Notes
- 30/04/2011
COBS 4.5
Communicating with retail clients
- 01/11/2007
Application
COBS 4.5.1
See Notes
- (1) Subject to (2) and (3), this section applies to a firm in relation to:
- (a) the provision of information in relation to its designated investment business; and
- (b) the communication or approval of a financial promotion;
- where such information or financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail client.
- (2) If a communication relates to a firm's MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is a third party prospectus;
- (b) if it is image advertising.
- (3) If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is an excluded communication;
- (b) to the extent that it is a prospectus advertisement to which PR 3.3 applies;
- (c) if it is image advertising.
- 06/08/2010
- Past version of COBS 4.5.1 before 06/08/2010
General rule
COBS 4.5.2
See Notes
A firm must ensure that information:
- (1) includes the name of the firm;
- (2) is accurate and in particular does not emphasise any potential benefits of relevant business or a relevant investment without also giving a fair and prominent indication of any relevant risks;
- (3) is sufficient for, and presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received; and
- (4) does not disguise, diminish or obscure important items, statements or warnings.
[Note: article 27(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 4.5.3
See Notes
- 01/11/2007
COBS 4.5.4
See Notes
- 01/11/2007
COBS 4.5.5
See Notes
- 01/11/2007
Comparative information
COBS 4.5.6
See Notes
- (1) If information compares relevant business, relevant investments, or persons who carry on relevant business, a firm must ensure that:
- (a) the comparison is meaningful and presented in a fair and balanced way; and
- (b) in relation to MiFID or equivalent third country business;
- (i) the sources of the information used for the comparison are specified; and
- (ii) the key facts and assumptions used to make the comparison are included.
- (2) In this rule, in relation to MiFID or equivalent third country business, ancillary services are to be regarded as relevant business.
[Note: article 27(3) of the MiFID implementing Directive]
- 06/02/2008
- Past version of COBS 4.5.6 before 06/02/2008
Referring to tax
COBS 4.5.7
See Notes
- (1) If any information refers to a particular tax treatment, a firm must ensure that it prominently states that the tax treatment depends on the individual circumstances of each client and may be subject to change in future.
- [Note: article 27(7) of the MiFID implementing Directive]
- (2) This rule applies in relation to MiFID or equivalent third country business or, otherwise, to a financial promotion. However, it does not apply to a financial promotion to the extent that it relates to:
- (a) [deleted]
- (b) a pure protection contract that is a long-term care insurance contract.
- 01/11/2009
- Past version of COBS 4.5.7 before 01/11/2009
Consistent financial promotions
COBS 4.5.8
See Notes
- (1) A firm must ensure that information contained in a financial promotion is consistent with any information the firm provides to a retail client in the course of carrying on designated investment business or, in the case of MiFID or equivalent third country business, ancillary services.
- [Note: article 29(7) of the MiFID implementing Directive]
- (2) This rule does not apply to a financial promotion to the extent that it relates to:
- (a) [deleted]
- (b) a pure protection contract that is a long-term care insurance contract.
- 01/11/2009
- Past version of COBS 4.5.8 before 01/11/2009
COBS 4.6
Past, simulated past and future performance
- 01/11/2007
Application
COBS 4.6.1
See Notes
- (1) Subject to (2) and (3), this section applies to a firm in relation to:
- (a) the provision of information in relation to its MiFID or equivalent third country business;
- (b) the communication or approval of a financial promotion;
- where such information or financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail client.
- (2) If a communication relates to a firm's MiFID or equivalent third country business , this section does not apply:
- (a) to the extent that the communication is a third party prospectus;
- (b) if it is image advertising.
- (3) If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is an excluded communication;
- (b) to the extent that it is a prospectus advertisement to which PR 3.3 applies;
- (c) if it is image advertising;
- (d) to the extent that it relates to a deposit that is not a structured deposit;
- (e) to the extent that it relates to a pure protection contract that is a long-term care insurance contract.
- 06/08/2010
- Past version of COBS 4.6.1 before 06/08/2010
Past performance
COBS 4.6.2
See Notes
A firm must ensure that information that contains an indication of past performance of relevant business, a relevant investment or a financial index, satisfies the following conditions:
- (1) that indication is not the most prominent feature of the communication;
- (2) the information includes appropriate performance information which covers at least the immediately preceding five years, or the whole period for which the investment has been offered, the financial index has been established, or the service has been provided if less than five years, or such longer period as the firm may decide, and in every case that performance information must be based on and show complete 12-month periods;
- (3) the reference period and the source of information are clearly stated;
- (4) the information contains a prominent warning that the figures refer to the past and that past performance is not a reliable indicator of future results;
- (5) if the indication relies on figures denominated in a currency other than that of the EEA State in which the retail client is resident, the currency is clearly stated, together with a warning that the return may increase or decrease as a result of currency fluctuations;
- (6) if the indication is based on gross performance, the effect of commissions, fees or other charges is disclosed.
[Note: article 27(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 4.6.3
See Notes
- 01/11/2007
COBS 4.6.4
See Notes
- 06/02/2008
- Past version of COBS 4.6.4 before 06/02/2008
COBS 4.6.4A
See Notes
Percentage growth | |||||
[Fund name] | Quarter/Year - Quarter/Year | Quarter/Year - Quarter/Year | Quarter/ Year - Quarter/Year | Quarter/ Year - Quarter/Year | Quarter/ Year - Quarter/ Year |
pgr% | pgr% | pgr% | pgr% | pgr% |
Notes:
1. The table should show performance information for five (or if performance information for fewer than five is available, all) complete 12-month periods, the most recent of which ends with the last full quarter preceding the date on which the firm first communicates or approves the financial promotion. 2. For products with performance data for fewer than five 12-month periods, firms should clearly indicate that performance data does not exist for the relevant periods. 3. No allowance should be made for tax recoveries on income for pension contracts, ISAs or PEPs. 4. pgr is the percentage growth rate for the year, where: pgr = ((P1 - P0)/PO)*100 and rounded to the nearest 0.1%, with exact 0.05% rounded to the nearest even 0.1%; and where P0 is the price at the start of the 12-month period and P1 is the price on the same day in the following 12-month period. 5. The prices should allow for any net distributions to be reinvested. 6. The price at P1 must be adjusted for any charges since the date of P0 which are based on a proportion of the fund and are levied by the cancellation of units. 7. The firm should use single pricing, or (if this is not available) bid to bid prices, unless the firm has reasonable grounds to be satisfied that another basis would better reflect the past performance of the fund.
|
- 01/11/2007
COBS 4.6.4B
See Notes
- (1) The firm should present the information referred to in COBS 4.6.4 G no less prominently than any other past performance information.
- (2) This guidance does not apply to a prospectus, key investor information document or simplified prospectus drawn up in accordance with COLL.
COBS 4.6.5
See Notes
- (1) In relation to a packaged product (other than a scheme, a unit-linked life policy, unit-linked personal pension scheme or a unit-linked stakeholder pension scheme (that is not a unitised with-profits life policy or stakeholder pension scheme)), the information should be given on:
- (a) an offer to bid basis (which should be stated) if there is an actual return or comparison of performance with other investments; or
- (b) an offer to offer, bid to bid or offer to bid basis (which should be stated) if there is a comparison of performance with an index or with movements in the price of units; or
- (c) a single pricing basis with allowance for charges.
- (2) If the pricing policy of the investment has changed, the prices used should include such adjustments as are necessary to remove any distortions resulting from the pricing method.
- 01/11/2007
Simulated past performance
COBS 4.6.6
See Notes
A firm must ensure that information that contains an indication of simulated past performance of relevant business, a relevant investment or a financial index, satisfies the following conditions:
- (1) it relates to an investment or a financial index;
- (2) the simulated past performance is based on the actual past performance of one or more investments or financial indices which are the same as, or underlie, the investment concerned;
- (3) in respect of the actual past performance, the conditions set out in paragraphs (1) to (3), (5) and (6) of the rule on past performance (COBS 4.6.2 R) are complied with; and
- (4) the information contains a prominent warning that the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance.
[Note: article 27(5) of the MiFID implementing Directive]
- 01/11/2007
Future performance
COBS 4.6.7
See Notes
- (1) A firm must ensure that information that contains an indication of future performance of relevant business, a relevant investment, a structured deposit or a financial index, satisfies the following conditions:
- (a) it is not based on and does not refer to simulated past performance;
- (b) it is based on reasonable assumptions supported by objective data;
- (c) it discloses the effect of commissions, fees or other charges if the indication is based on gross performance; and
- (d) it contains a prominent warning that such forecasts are not a reliable indicator of future performance.
- (2) Other than in relation to MiFID or equivalent third country business, this rule only applies to financial promotions that relate to a financial instrument (or a financial index that relates exclusively to financial instruments) or a structured deposit.
[Note: article 27(6) of the MiFID implementing Directive]
- 01/11/2007
COBS 4.6.8
See Notes
- 01/11/2007
COBS 4.6.9
See Notes
- (1) A firm that communicates to a client a projection for a packaged product which is not a financial instrument must ensure that the projection complies with the projections rules in COBS 13.4, COBS 13.5 and COBS 13 Annex 2.
- (2) A firm must not communicate a projection for a highly volatile product to a client unless the product is a financial instrument.
- 06/02/2008
- Past version of COBS 4.6.9 before 06/02/2008
COBS 4.7
Direct offer financial promotions
- 01/11/2007
COBS 4.7.1
See Notes
- (1) Subject to (3) and (4), a firm must ensure that a direct offer financial promotion that is addressed to, or disseminated in such a way that it is likely to be received by, a retail client contains:
- (a) such of the information referred to in the rules on information disclosure (COBS 6.1.4 R, COBS 6.1.6 R, COBS 6.1.7 R, COBS 6.1.9 R, COBS 14.3.2 R, COBS 14.3.3 R, COBS 14.3.4 R and COBS 14.3.5 R) as is relevant to that offer or invitation; and
- [Note: article 29(8) of the MiFID implementing Directive, the rules listed implement Articles 30 to 33 of the MiFID implementing Directive]
- (b) if it does not relate to MiFID or equivalent third country business, additional appropriate information about the relevant business and relevant investments so that the client is reasonably able to understand the nature and risks of the relevant business and relevant investments and consequently to take investment decisions on an informed basis.
- (2) This rule does not require the information in (1) to be included in a direct offer financial promotion if, in order to respond to an offer or invitation contained in it, the retail client must refer to another document or documents, which, alone or in combination, contain that information.
- (3) If a communication relates to a firm's MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is a third party prospectus;
- (b) if it is image advertising.
- (4) If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is an excluded communication;
- (b) to the extent that it is a prospectus advertisement to which PR 3.3 applies;
- (c) if it is image advertising;
- (d) to the extent that it relates to a deposit that is not a cash deposit ISA or cash deposit CTF;
- (e) to the extent that it relates to a pure protection contract that is a long-term care insurance contract.
- (5) In this rule, in relation to MiFID or equivalent third country business, ancillary services are to be regarded as relevant business.
- 06/08/2010
- Past version of COBS 4.7.1 before 06/08/2010
Guidance
COBS 4.7.2
See Notes
- 01/11/2007
COBS 4.7.3
See Notes
- (1) COBS 4.7.1R (2) allows a firm to communicate a direct offer financial promotion that does not contain all the information required by COBS 4.7.1R (1), if the firm can demonstrate that the client has referred to the required information before the client makes or accepts an offer in response to the direct offer financial promotion.
- (2) A firm communicating or approving a direct offer financial promotion may also be subject to the rules on providing product information in COBS 14.2, including the exceptions in COBS 14.2.5 R to 14.2.9 R.
- 01/11/2007
COBS 4.7.4
See Notes
In order to enable a client to make an informed assessment of a relevant investment or relevant business, a firm may wish to include in a direct offer financial promotion:
- (1) a summary of the taxation of any investment to which it relates and the taxation consequences for the average member of the group to whom it is directed or by whom it is likely to be received;
- (2) a statement that the recipient should seek a personal recommendation if he has any doubt about the suitability of the investments or services being promoted; and
- (3) (in relation to a promotion for a packaged product that is not a financial instrument) a key features illustration, in which a generic projection may generally be used.
- 01/11/2007
COBS 4.7.5
See Notes
- 01/11/2007
COBS 4.7.5A
See Notes
- 01/07/2011
COBS 4.7.6
See Notes
- (1) A firm must not communicate or approve a direct offer financial promotion:
- (a) relating to a warrant or derivative;
- (b) to or for communication to a retail client; and
- (c) where the firm will not itself be required to comply with the rules on appropriateness (see COBS 10);
- unless the firm has adequate evidence that the condition in (2) is satisfied.
- (2) The condition is that the person who will arrange or deal in relation to the derivative or warrant will comply with the rules on appropriateness or equivalent requirements for any application or order that the person is aware, or ought reasonably to be aware, is in response to the direct offer financial promotion.
- 06/03/2008
COBS 4.8
Cold calls and other promotions that are not in writing
- 01/11/2007
Application
COBS 4.8.1
See Notes
This section applies to a firm in relation to the communication of a financial promotion that is not in writing, but it does not apply:
- (1) to the extent that the financial promotion is an excluded communication;
- (2) if the financial promotion is image advertising;
- (3) if the financial promotion is a non-retail communication;
- (4) [deleted]
- (5) to the extent that the financial promotion relates to a pure protection contract that is a long-term care insurance contract.
- 06/08/2010
- Past version of COBS 4.8.1 before 06/08/2010
Restriction on cold calling
COBS 4.8.2
See Notes
A firm must not make a cold call unless:
- (1) the recipient has an established existing client relationship with the firm and the relationship is such that the recipient envisages receiving cold calls; or
- (2) the cold call relates to a generally marketable packaged product which is not:
- (a) a higher volatility fund; or
- (b) a life policy with a link (including a potential link) to a higher volatility fund; or
- (3) the cold call relates to a controlled activity to be carried on by an authorised person or exempt person and the only controlled investments involved or which reasonably could be involved are:
- (a) readily realisable securities (other than warrants); and
- (b) generally marketable non-geared packaged products.
- 01/11/2007
Promotions that are not in writing
COBS 4.8.3
See Notes
A firm must not communicate a solicited or unsolicited financial promotion that is not in writing, to a client outside the firm's premises, unless the person communicating it:
- (1) only does so at an appropriate time of the day;
- (2) identifies himself and the firm he represents at the outset and makes clear the purpose of the communication;
- (3) clarifies if the client would like to continue with or terminate the communication, and terminates the communication at any time that the client requests it; and
- (4) gives a contact point to any client with whom he arranges an appointment.
- 06/08/2010
- Past version of COBS 4.8.3 before 06/08/2010
COBS 4.9
Financial promotions with an overseas element
- 01/11/2007
Application
COBS 4.9.1
See Notes
- (1) Subject to (2) and (3), this section applies to a firm in relation to the communication or approval of a financial promotion that relates to the business of an overseas person.
- (2) This section does not apply to a firm in relation to its MiFID or equivalent third country business.
- (3) If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is an excluded communication;
- (b) to the extent that it is a prospectus advertisement to which PR 3.3 applies;
- (c) if it is image advertising;
- (d) if it is a non-retail communication;
- (e) [deleted]
- (f) to the extent that it relates to a pure protection contract that is a long-term care insurance contract.
- 06/08/2010
- Past version of COBS 4.9.1 before 06/08/2010
COBS 4.9.2
See Notes
- 01/11/2007
Financial promotions for the business of an overseas person
COBS 4.9.3
See Notes
A firm must not communicate or approve a financial promotion which relates to a particular relevant investment or relevant business of an overseas person, unless:
- (1) the financial promotion makes clear which firm has approved or communicated it and, where relevant, explains:
- (a) that the rules made under the Act for the protection of retail clients do not apply;
- (b) the extent and level to which the compensation scheme will be available, or if the scheme will not be available, a statement to that effect; and
- (c) if the communicator wishes, the protection or compensation available under another system of regulation; and
- (2) the firm has taken reasonable steps to satisfy itself that the overseas person will deal with retail clients in the United Kingdom in an honest and reliable way.
- 06/08/2010
- Past version of COBS 4.9.3 before 06/08/2010
Financial promotions for an overseas long-term insurer
COBS 4.9.4
See Notes
A firm may only communicate or approve a financial promotion to enter into a life policy with a person who is:
- (1) an authorised person; or
- (2) an exempt person who is exempt in relation to effecting or carrying out contracts of insurance of the class to which the financial promotion relates; or
- (3) an overseas long-term insurer that is entitled under the law of its home country or territory to carry on there insurance business of the class to which the financial promotion relates.
- 06/02/2008
- Past version of COBS 4.9.4 before 06/02/2008
COBS 4.9.5
See Notes
A financial promotion for an overseas long-term insurer, which has no establishment in the United Kingdom, must include:
- (1) the full name of the overseas long-term insurer, the country where it is registered, and, if different, the country where its head office is situated;
- (2) a prominent statement that 'holders of policies issued by the company will not be protected by the Financial Services Compensation Scheme if the company becomes unable to meet its liabilities to them'; and
- (3) if any trustee, investment manager or United Kingdom agent of the overseas long-term insurer is named which is not independent of the overseas long-term insurer, a prominent statement of that fact.
- 01/11/2007
COBS 4.9.6
See Notes
A financial promotion for an overseas long-term insurer which is authorised to carry on long-term insurance business in any country or territory listed in paragraph (c) of the Glossary definition of overseas long-term insurer must also include:
- (1) the full name of any trustee of property of any description which is retained by the overseas long-term insurer in respect of the promoted contracts;
- (2) an indication whether the investment of such property (or any part of it) is managed by the overseas long-term insurer or by another person and the full name of any investment manager;
- (3) the registered office of any such trustee and of any investment manager and of his principal office (if different); and
- (4) where any person in the United Kingdom takes, or may take, any steps on behalf of the overseas long-term insurer to enter into a promoted contract, the following details:
- (a) the full name of the overseas long-term insurer;
- (b) the registered office, head office or principal place of business of that person in the United Kingdom; and
- (c) if there is more than one such person, the principal or main person in the United Kingdom.
- 01/11/2007
COBS 4.9.7
See Notes
If a financial promotion relates to a life policy with an overseas long-term insurer but does not name the overseas long-term insurer by giving its full name or its business name:
- (1) it must include the following prominent statement: "This financial promotion relates to an insurance company which does not, and is not authorised to, carry on in any part of the United Kingdom the class of insurance business to which this promotion relates. This means that the management and solvency of the company are not supervised by the Financial Services Authority. Holders of policies issued by the company will not have the right to complain to the Financial Ombudsman Service if they have a complaint against the company and will not be protected by the Financial Services Compensation Scheme if the company should become unable to meet its liabilities to them"; and
- (2) if it also refers to other investments, it must make this clear.
- 01/11/2007
COBS 4.10
Systems and controls and approving and communicating financial promotions
- 01/11/2007
Systems and controls
COBS 4.10.1
See Notes
- 01/11/2007
Approving financial promotions
COBS 4.10.2
See Notes
- (1) Before a firm approves a financial promotion for communication by an unauthorised person, it must confirm that the financial promotion complies with the financial promotion rules.
- (2) If, at any time after a firm has complied with (1), a firm becomes aware that a financial promotion no longer complies with the financial promotion rules, it must withdraw its approval and notify any person that it knows to be relying on its approval as soon as reasonably practicable.
- (3) When approving a financial promotion, the firm must confirm compliance with the financial promotion rules that would have applied if the financial promotion had been communicated by a firm other than in relation to MiFID or equivalent third country business.
- 01/11/2007
COBS 4.10.3
See Notes
- (1) Section 21(1) of the Act (Restrictions on financial promotion) prohibits an unauthorised person from communicating a financial promotion, in the course of business, unless an exemption applies or the financial promotion is approved by a firm. Many of the rules in this chapter apply when a firm approves a financial promotion in the same way as when a firm communicates a financial promotion itself.
- (2) A firm may also wish to approve a financial promotion that it communicates itself. This would ensure that an unauthorised person who then also communicates the financial promotion to another person will not contravene the restriction on financial promotion in the Act (section 21).
- (3) Approving a financial promotion for communication by an unauthorised person is not MiFID or equivalent third country business.
- (4) A firm may not approve a financial promotion relating to an unregulated collective investment scheme unless the firm would be able to communicate the promotion without breaching section 238(1) of the Act (see section 240 of the Act). The exemptions from that section in the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (as amended from time to time) are relevant.
- 01/11/2007
COBS 4.10.4
See Notes
- 01/11/2007
COBS 4.10.5
See Notes
- 01/11/2007
COBS 4.10.6
See Notes
- 01/11/2007
COBS 4.10.7
See Notes
- 01/11/2007
Communicating financial promotions
COBS 4.10.8
See Notes
- 01/11/2007
COBS 4.10.9
See Notes
- 01/11/2007
Relying on another firm's confirmation of compliance
COBS 4.10.10
See Notes
- (1) A firm (A) will not contravene any of the financial promotion rules if it communicates a financial promotion which has been produced by another person and:
- (a) A takes reasonable care to establish that another firm (B) has confirmed that the financial promotion complies with the financial promotion rules;
- (b) A takes reasonable care to establish that it communicates the financial promotion only to recipients of the type for whom it was intended at the time B carried out the confirmation exercise; and
- (c) so far as A is, or ought reasonably to be, aware:
- (i) the financial promotion has not ceased to be fair, clear and not misleading since that time; and
- (ii) B has not withdrawn the financial promotion.
- (2) This rule does not apply in relation to MiFID or equivalent third country business.
- 01/11/2007
COBS 4.10.11
See Notes
- 01/11/2007
COBS 4.11
Record keeping: financial promotion
- 01/11/2007
COBS 4.11.1
See Notes
- (1) A firm must make an adequate record of any financial promotion it communicates or approves, other than a financial promotion made in the course of a personal visit, telephone conversation or other interactive dialogue.
- (2) For a telemarketing campaign, a firm must make an adequate record of copies of any scripts used.
- (3) A firm must retain the record in relation to a financial promotion relating to:
- (a) a pension transfer, pension opt-out or FSAVC, indefinitely;
- (b) a life policy, occupational pension scheme, SSAS, personal pension scheme or stakeholder pension scheme, for six years;
- (c) MiFID or equivalent third country business, for five years; and
- (d) any other case, for three years.
- (4) If a communication relates to a firm's MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that the communication is a third party prospectus;
- (b) if it is image advertising;
- (c) if it is a non-retail communication.
- (5) If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:
- (a) to the extent that it is an excluded communication;
- (b) to the extent that it is a prospectus advertisement to which PR 3.3 applies;
- (c) if it is image advertising;
- (d) if it is a non-retail communication;
- (e) [deleted]
- (f) to the extent that it relates to a pure protection contract that is a long-term care insurance contract.
[Note: see article 51(3) of the MiFID implementing Directive]
COBS 4.11.2
See Notes
- 01/11/2007
COBS 4.11.3
See Notes
- 01/11/2007
COBS 4.12
Unregulated collective investment schemes
- 01/11/2007
COBS 4.12.1
See Notes
- (1) A firm may communicate an invitation or inducement to participate in an unregulated collective investment scheme without breaching the restriction on promotion in section 238 of the Act if the promotion falls within an exemption in the table in (4), as explained further in the Notes.
- (2) Where the left-hand column in the table in (4) refers to promotion to a category of person, this means that the invitation or inducement:
- (a) is made only to recipients who the firm has taken reasonable steps to establish are persons in that category; or
- (b) is directed at recipients in a way that may reasonably be regarded as designed to reduce, so far as possible, the risk of participation in the collective investment scheme by persons who are not in that category.
- (3) A firm may rely on more than one exemption in relation to the same invitation or inducement.
- (4)
Promotion to: | Promotion of an unregulated collective investment scheme which is: | ||||||
Category 1 person | A. | that collective investment scheme; or | |||||
(1) | a person who is already a participant in an unregulated collective investment scheme; or | B. | any other collective investment scheme whose underlying property and risk profile are both 'substantially similar' (see Note 1) to those of that collective investment scheme; or | ||||
(2) | A person who has been, in the last 30 months, a participant in an unregulated collective investment scheme. | C. | a collective investment scheme which is intended to absorb or take over the assets of that collective investment scheme; or | ||||
D. | a collective investment scheme, units in which are being offered by its operator as an alternative to cash on the liquidation of that collective investment scheme. | ||||||
Category 2 person | That collective investment scheme | ||||||
(1) | A person: | ||||||
(a) | for whom the firm has taken reasonable steps to ensure that investment in the collective investment scheme is suitable; and | ||||||
(b) | who is an 'established' or 'newly accepted' client of the firm or of a person in the same group as the firm (see Notes 2 & 3). | ||||||
Category 3 person A person who is eligible to participate in a scheme constituted under: |
Any such collective investment scheme | ||||||
(1) | the Church Funds Investment Measure 1958; | ||||||
(2) | section 24 of the Charities Act 1993; or | ||||||
(3) | section 25 of the Charities Act (Northern Ireland) 1964. | ||||||
Category 4 person An eligible employee, that is, a person who is: |
1. | A collective investment scheme the instrument constituting which: | |||||
(1) | an officer; | A. | restricts the property of the scheme, apart from cash and near cash, to: | ||||
(2) | an employee; | (1) | (where the employer is a company) shares in and debentures of company or any other connected company (see Note 4); | ||||
(3) | a former officer or employee; or | (2) | (in any case), any property, provided that the scheme takes the form of: | ||||
(4) | a member of the immediate family of any of (1) - (3), | (i) | a limited partnership, under the terms of which the employer (or connected company) will be the unlimited partner and the eligible employees will be some or all of the limited partners; or | ||||
of an employer which is (or is in the same group as) the firm, or which has accepted responsibility for the activities of the firm in carrying out the designated investment business in question. | (ii) | a trust which the firm reasonably believes not to contain any risk that any eligible employee may be liable to make any further payments (other than charges) for investment transactions earlier entered into, which the eligible employee was not aware of at the time he entered into them; and | |||||
B. | (in a case falling within A(1) above) restricts participation in the scheme to eligible employees, the employer and any connected company. | ||||||
2. | Any collective investment scheme provided that the participation of eligible employees is to facilitate their co-investment: | ||||||
(i) | with one or more companies in the same group as their employer (which may include the employer); or | ||||||
(ii) | with one or more clients of such a company. | ||||||
Category 5 person A person admitted to membership of the Society of Lloyd's or any person by law entitled or bound to administer his affairs. |
A scheme in the form of a limited partnership which is established for the sole purpose of underwriting insurance business at Lloyd's. | ||||||
Category 6 person An exempt person (other than a person exempted only by section 39 of the Act (Exemption of appointed representatives)) if the financial promotion relates to a regulated activity in respect of which the person is exempt from the general prohibition. |
Any collective investment scheme. | ||||||
Category 7 person An eligible counterparty or a professional client. |
Any collective investment scheme in relation to which the client is categorised as a professional client or eligible counterparty (see Note 5). | ||||||
Category 8 person A person: |
Any collective investment scheme covered by the assessment. | ||||||
(1) | in relation to whom the firm has undertaken an adequate assessment of his expertise, experience and knowledge and that assessment gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the person is capable of making his own investment decisions and understanding the risks involved; | ||||||
(2) | to whom the firm has given a clear written warning that this will enable the firm to promote unregulated collective investment schemes to the client; and | ||||||
(3) | who has stated in writing, in a document separate from the contract, that he is aware of the fact the firm can promote certain unregulated collective investment schemes to him. |
The following Notes explain certain words and phrases used in the table above. | ||
Note 1 | The property of a collective investment scheme is 'substantially similar' to that of another collective investment scheme if in both cases the objective is to invest in the same one of the following sectors: | |
(a) | on-exchange derivatives or warrants; | |
(b) | on-exchange (or quoted) securities; | |
(c) | the property market (whether in security of property companies or in property itself); | |
(d) | collectable items of a particular description (such as works of art, antique vehicles, etc); | |
(e) | artistic productions (such as films, television, opera, theatre or music); | |
(f) | unlisted investments (including unlisted debt securities). | |
The risk profile of a scheme will be substantially similar to that of another scheme only if there is such similarity in relation to both liquidity and volatility. | ||
Note 2 | A person is an 'established client' of another person if he has been and remains an actual client of that person in relation to designated investment business done with or through that other person. | |
Note 3 | A person is a 'newly accepted' client of a firm if: | |
(a) | a written agreement relating to designated investment business exists between the client and the firm (or, if the client is normally resident outside the United Kingdom, an oral or written agreement); and | |
(b) | that agreement has been obtained without any contravention of section 238 or 240 of the Act, or of any rule in COBS applying to the firm or (as far as the firm is reasonably aware) any other authorised person. | |
Note 4 | A company is 'connected' with another company if: | |
(a) | they are in the same group; or | |
(b) | one company is entitled either alone or with another company in the same group, to exercise or control the exercise of a majority of the voting rights attributable to the share capital, which are exercisable in all circumstances at any general meeting of the other company or of its holding company. | |
Note 5 | Firms may use the client categorisation regime that applies to business other than MiFID or equivalent third country business. [This is the case even if the firm will be within the scope of MiFID when it makes the promotion.] |
COBS 4.12.2
See Notes
- 01/11/2007
COBS 4.13
UCITS
- 01/07/2011
Application
COBS 4.13.1
See Notes
- (1) This section applies to a firm in relation to a communication to a client, including an excluded communication, that is a marketing communication within the meaning of the UCITS Directive.
- (2) This section does not apply to:
- (a) image advertising; or
- (b) the instrument constituting the scheme, the prospectus, the key investor information (or alternatively the simplified prospectus or EEA simplified prospectus) or the periodic reports and accounts of either a UCITS scheme or an EEA UCITS scheme.
[Note: recital (58) of the UCITS Directive]
- 01/07/2011
Marketing communications relating to UCITS schemes or EEA UCITS schemes
COBS 4.13.2
See Notes
- (1) A firm must ensure that a marketing communication that comprises an invitation to purchase units in a UCITS scheme or EEA UCITS scheme and that contains specific information about the scheme:
- (a) makes no statement that contradicts or diminishes the significance of the information contained in the prospectus and the key investor information document or EEA key investor information document for the scheme;
- (b) indicates that a prospectus exists for the scheme and that the key investor information document or EEA key investor information document is available; and
- (c) specifies where and in which language such information or documents may be obtained by investors or potential investors or how they may obtain access to them.
- (2) Where a UCITS scheme or an EEA UCITS scheme may invest more than 35% of its scheme property in transferable securities and money market instruments issued or guaranteed by an EEA State, one or more of its local authorities, a third country or a public international body to which one or more EEA States belong, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to the investment policy and indicating the particular EEA States, local authorities, third countries or public international bodies in the securities of which the scheme intends to invest or has invested more than 35% of its scheme property.
- (3) Where a UCITS scheme or EEA UCITS scheme invests principally in units in collective investment schemes, deposits or derivatives, or replicates a stock or debt securities index in accordance with COLL 5.2.31 R (Schemes replicating an index) or equivalent national measures implementing article 53 of the UCITS Directive, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to the investment policy.
- (4) Where the net asset value of a UCITS scheme or EEA UCITS scheme has, or is likely to have, high volatility owing to its portfolio composition or the portfolio management techniques that are or may be used, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to that characteristic.
[Note: articles 54(3), 70(2), 70(3) and 77 of the UCITS Directive]
- 01/07/2011
Marketing communications relating to a feeder UCITS
COBS 4.13.3
See Notes
A firm must ensure that a marketing communication (other than a key investor information document or EEA key investor information document) relating to a feeder UCITS contains a statement that the feeder UCITS permanently invests at least 85% in value of its assets in units of its master UCITS.
[Note: article 63(4) of the UCITS Directive]
- 01/07/2011
COBS 5
Distance communications
COBS 5.1
The distance marketing disclosure rules
- 01/11/2007
Application
COBS 5.1.-1
See Notes
- (1) This section applies to a firm that carries on any distance marketing activity from an establishment in the United Kingdom, with or for a consumer in the United Kingdom or another EEA State.
- (2) If a firm is an intermediary rather than the supplier under the distance contract, references to 'firm' in COBS 5 Annex 1 R and COBS 5 Annex 2 R are to be interpreted as referring to the supplier except for references to 'firm' in COBS 5 Annex 1 R (2), (4) and (18).
The distance marketing disclosure rules
COBS 5.1.1
See Notes
A firm must provide a consumer with the distance marketing information (COBS 5 Annex 1R ) in good time before the consumer is bound by a distance contract or offer.
[Note: article 3(1) of the Distance Marketing Directive]
- 01/11/2007
COBS 5.1.2
See Notes
A firm must ensure that the distance marketing information, the commercial purpose of which must be made clear, is provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the legal principles governing the protection of those who are unable to give their consent, such as minors.
[Note: article 3(2) of the Distance Marketing Directive]
- 01/11/2007
COBS 5.1.3
See Notes
When a firm makes a voice telephony communication to a consumer, it must make its identity and the purpose of its call explicitly clear at the beginning of the conversation.
[Note: article 3(3)(a) of the Distance Marketing Directive]
- 01/11/2007
Exception: contracts for payment services
COBS 5.1.3A
See Notes
[Note: article 4(5) of the Distance Marketing Directive]
- 01/11/2009
COBS 5.1.3B
See Notes
- 01/11/2009
COBS 5.1.4
See Notes
A firm must ensure that information on contractual obligations to be communicated to a consumer during the pre-contractual phase is in conformity with the contractual obligations which would result from the law presumed to be applicable to the distance contract if that contract is concluded.
[Note: article 3(4) of the Distance Marketing Directive]
- 01/11/2007
Terms and conditions, and form
COBS 5.1.5
See Notes
A firm must communicate to the consumer all the contractual terms and conditions and the information referred to in the distance marketing disclosure rules (COBS 5.1.1 R to COBS 5.1.4 R) on a durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer.
[Note: article 5(1) of the Distance Marketing Directive]
- 01/11/2007
COBS 5.1.6
See Notes
- 01/11/2007
Exception: distance contract as a stage in the provision of another service
COBS 5.1.7
See Notes
This section does not apply to a distance contract to deal as agent, advise or arrange, if the distance contract is concluded merely as a stage in the provision of another service by the firm or another person.
[Note: recital 19 to the Distance Marketing Directive]
- 01/11/2007
Exception: successive operations
COBS 5.1.8
See Notes
In the case of a distance contract comprising an initial service agreement, followed by successive operations or a series of separate operations of the same nature performed over time, the rules in this section only apply to the initial agreement.
[Note: article 1(2) of the Distance Marketing Directive]
- 01/11/2007
COBS 5.1.9
See Notes
If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the distance marketing disclosure rules (COBS 5.1.1 R to COBS 5.1.4 R) will only apply:
- (1) when the first operation is performed; and
- (2) if no operation of the same nature is performed for more than a year, when the next operation is performed (the next operation being deemed the first in a new series of operations).
[Note: recital 16 and article 1(2) of the Distance Marketing Directive]
- 01/11/2007
COBS 5.1.10
See Notes
In this section:
- (1) 'initial service agreement' includes the opening of a bank account and the concluding of a portfolio management contract;
- (2) 'operations' includes transactions made within the framework of a portfolio management contract; and
- (3) adding new elements to an initial service agreement, such as the ability to use an electronic payment instrument together with one's existing bank account, does not constitute an 'operation' but an additional contract to which the rules in this section apply. The subscription to new units of the same collective investment scheme is considered to be one of 'successive operations of the same nature'.
[Note: recital 17 of the Distance Marketing Directive]
COBS 5.1.11
See Notes
In the FSA's view, other examples of:
- (1) 'initial service agreement' include:
- (a) subscribing to an investment trust savings scheme; or
- (b) concluding a life policy, personal pension scheme or stakeholder pension scheme that includes a pre-selected option providing for future increases or decreases in regular premiums or payments; and
- (2) 'operations' include:
- (a) successive purchases or sales of shares under an investment trust savings scheme; and
- (b) subsequent index-linked changes to premiums or increases or decreases to pension contributions following fluctuations in salary.
- 01/11/2007
Exception: voice telephony communications
COBS 5.1.12
See Notes
In the case of a voice telephony communication, and subject to the explicit consent of the consumer, only the abbreviated distance marketing information (COBS 5 Annex 2R) needs to be provided during that communication. However, a firm must still provide the distance marketing information (COBS 5 Annex 1R) on a durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer, unless another exception applies.
[Note: articles 3(3)(b) and 5(1) of the Distance Marketing Directive]
- 01/11/2007
Exception: means of distance communication not enabling disclosure
COBS 5.1.13
See Notes
A firm may provide the distance marketing information (COBS 5 Annex 1R) and the contractual terms and conditions in a durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a consumer's request using a means of distance communication that does not enable the provision of that information in that form in good time before the consumer is bound by any distance contract or offer.
[Note: article 5(2) of the Distance Marketing Directive]
- 01/11/2007
Exception: contracts for payment services
COBS 5.1.13A
See Notes
Where a distance contract is also a contract for payment services to which the Payment Services Regulations apply, a firm is required to provide to the consumer only the information specified in rows 7 to 12, 15, 16 and 20 of COBS 5 Annex 1 R.
[Note: article 4(5) of the Distance Marketing Directive]
- 01/11/2009
COBS 5.1.13B
See Notes
- 01/11/2009
Distance marketing: other provisions
COBS 5.1.14
See Notes
If, at any time during the contractual relationship, a consumer that is a party to a distance contract asks a firm:
- (1) for a paper copy of the terms and conditions of that contract; or
- (2) to change the means of distance communication used;
[Note: article 5(3) of the Distance Marketing Directive]
- 01/11/2007
Unsolicited services
COBS 5.1.15
See Notes
- (1) A firm must not enforce, or seek to enforce, any obligations under a distance contract against a consumer, in the event of an unsolicited supply of services, the absence of reply not constituting consent.
- (2) This rule does not apply to the tacit renewal of a distance contract.
[Note: article 9 of the Distance Marketing Directive]
- 01/11/2007
Mandatory nature of consumer's rights
COBS 5.1.16
See Notes
If a consumer purports to waive any of the consumer's rights created or implied by the rules in this section, a firm must not accept that waiver, nor seek to rely on or enforce it against the consumer.
[Note: article 12 of the Distance Marketing Directive]
- 01/11/2007
COBS 5.1.17
See Notes
If a firm proposes to enter into a distance contract with a consumer that will be governed by the law of a country outside the EEA, the firm must ensure that the consumer will not lose the protection created by the rules in this section if the distance contract has a close link with the territory of one or more EEA States.
[Note: articles 12 and 16 of the Distance Marketing Directive]
- 01/11/2007
COBS 5.2
E-Commerce
- 01/11/2007
Application
COBS 5.2.1
See Notes
- 01/11/2007
Information about the firm and its products or services
COBS 5.2.2
See Notes
A firm must make at least the following information easily, directly and permanently accessible to the recipients of the information society services it provides:
- (1) its name;
- (2) the geographic address at which it is established;
- (3) the details of the firm, including its e-mail address, which allow it to be contacted rapidly and communicated with in a direct and effective manner;
- (4) an appropriate statutory status disclosure statement (GEN 4 Annex 1 R), together with a statement which explains that it is on the FSA register and includes its FSA register number;
- (5) if it is a professional firm, or a person regulated by the equivalent of a designated professional body in another EEA State:
- (a) the name of the professional body (including any designated professional body) or similar institution with which it is registered;
- (b) the professional title and the EEA State where it was granted;
- (c) a reference to the applicable professional rules in the EEA State of establishment and the means to access them; and
- (6) where the firm undertakes an activity that is subject to VAT, its VAT number.
[Note: article 5(1) of the E-Commerce Directive]
- 01/11/2007
COBS 5.2.3
See Notes
If a firm refers to price, it must do so clearly and unambiguously, indicating whether the price is inclusive of tax and delivery costs.
[Note: article 5(2) of the E-Commerce Directive]
- 01/11/2007
COBS 5.2.4
See Notes
A firm must ensure that commercial communications which are part of, or constitute, an information society service, comply with the following conditions:
- (1) the commercial communication must be clearly identifiable as such;
- (2) the person on whose behalf the commercial communication is made must be clearly identifiable;
- (3) promotional offers must be clearly identifiable as such, and the conditions that must be met to qualify for them must be easily accessible and presented clearly and unambiguously; and
- (4) promotional competitions or games must be clearly identifiable as such, and the conditions for participation must be easily accessible and presented clearly and unambiguously.
[Note: article 6 of the E-Commerce Directive]
- 01/11/2007
COBS 5.2.5
See Notes
An unsolicited commercial communication sent by e-mail by a firm established in the United Kingdom must be identifiable clearly and unambiguously as an unsolicited commercial communication as soon as it is received by the recipient.
[Note: article 7(1) of the E-Commerce Directive]
- 01/11/2007
Requirements relating to the placing and receipt of orders
COBS 5.2.6
See Notes
A firm must (except when otherwise agreed by parties who are not consumers):
- (1) give an ECA recipient at least the following information, clearly, comprehensibly and unambiguously, and prior to the order being placed by the recipient of the service:
- (a) the different technical steps to follow to conclude the contract;
- (b) whether or not the concluded contract will be filed by the firm and whether it will be accessible;
- (c) the technical means for identifying and correcting input errors prior to the placing of the order; and
- (d) the languages offered for the conclusion of the contract;
- (2) indicate any relevant codes of conduct to which it subscribes and information on how those codes can be consulted electronically;
- (3) (when an ECA recipient places an order through technological means), acknowledge the receipt of the recipient's order without undue delay and by electronic means; and
- (4) make available to an ECA recipient, appropriate, effective and accessible technical means allowing the recipient to identify and correct input errors prior to the placing of an order.
[Note: articles 10(1) and (2) and 11(1) and (2) of the E-Commerce Directive]
- 01/11/2007
COBS 5.2.7
See Notes
For the purposes of COBS 5.2.6 R (3), an order and an acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them.
[Note: article 11(1) of the E-Commerce Directive]
- 01/11/2007
COBS 5.2.8
See Notes
Contractual terms and conditions provided by a firm to an ECA recipient must be made available in a way that allows the recipient to store and reproduce them.
[Note: article 10(3) of the E-Commerce Directive]
- 01/11/2007
Exception: contract concluded by e-mail
COBS 5.2.9
See Notes
The requirements relating to the placing and receipt of orders (COBS 5.2.6 R) do not apply to contracts concluded exclusively by exchange of e-mail or by equivalent individual communications.
[Note: article 10(4) and 11(3) of the E-Commerce Directive]
- 01/11/2007
COBS 5 Annex 1
Distance marketing information
- 01/11/2007
See Notes
Information about the firm | |
(1) | The name and the main business of the firm, the geographical address at which it is established and any other geographical address relevant for the consumer's relations with the firm. |
(2) | Where the firm has a representative established in the consumer's EEA State of residence, the name of that representative and the geographical address relevant for the consumer's relations with that representative. |
(3) | Where the consumer's dealings are with any professional other than the firm, the identity of that professional, the capacity in which he is acting with respect to the consumer, and the geographical address relevant to the consumer's relations with that professional. |
(4) | An appropriate statutory status disclosure statement (GEN 4), a statement that the firm is on the FSA Register and its FSA registration number. |
Information about the financial service | |
(5) | A description of the main characteristics of the service the firm will provide. |
(6) | The total price to be paid by the consumer to the firm for the financial service, including all related fees, charges and expenses, and all taxes paid through the firm or, where an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it. |
(7) | Where relevant, notice indicating that the service is related to instruments involving special risks related to their specific features or the operations to be executed or whose price depends on fluctuations in the financial markets outside the firm's control and that past performance is no indicator of future performance. |
(8) | Notice of the possibility that other taxes or costs may exist that are not paid via the firm or imposed by it. |
(9) | Any limitations on the period for which the information provided is valid, including a clear explanation as to how long a firm's offer applies as it stands. |
(10) | The arrangements for payment and performance. |
(11) | Details of any specific additional cost to the consumer for using a means of distance communication. |
Information about the contract | |
(12) | The existence or absence of a right to cancel or withdraw under the cancellation rules (COBS 15) and, where there is such a right, its duration and the conditions for exercising it, including information on the amount which the consumer may be required to pay (or which may not be returned to the consumer) in accordance with those rules, as well as the consequences of not exercising the right to cancel or withdraw. |
(13) | The minimum duration of the contract, in the case of services to be performed permanently or recurrently. |
(14) | Information on any rights the parties may have to terminate the contract early or unilaterally under its terms, including any penalties imposed by the contract in such cases. |
(15) | Practical instructions for exercising any right to cancel or withdraw, including the address to which any cancellation or withdrawal notice should be sent. |
(16) | The EEA State or States whose laws are taken by the firm as a basis for the establishment of relations with the consumer prior to the conclusion of the contract. |
(17) | Any contractual clause on the law applicable to the contract or on the competent court, or both. |
(18) | In which language, or languages, the contractual terms and conditions and the other information in this Annex will be supplied, and in which language, or languages, the firm, with the agreement of the consumer, undertakes to communicate during the duration of the contract. |
Information about redress | |
(19) | How to complain to the firm, whether complaints may subsequently be referred to the Financial Ombudsman Service and, if so, the methods for having access to it, together with equivalent information about any other applicable named complaints scheme. |
(20) | Whether compensation may be available from the compensation scheme, or any other named compensation scheme, if the firm is unable to meet its liabilities. |
[Note: Recitals 21 and 23 to, and article 3(1) of, the Distance Marketing Directive] |
- 01/11/2007
COBS 5 Annex 2
Abbreviated distance marketing disclosure
- 01/11/2007
See Notes
(1) | The identity of the person in contact with the consumer and his link with the firm. |
(2) | A description of the main characteristics of the financial service. |
(3) | The total price to be paid by the consumer to the firm for the financial service including all taxes paid via the firm or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it. |
(4) | Notice of the possibility that other taxes and/or costs may exist that are not paid via the firm or imposed by him. |
(5) | The existence or absence of a right to cancel or withdraw in accordance with the cancellation rules (COBS 15) and, where the right to cancel or withdraw exists, its duration and the conditions for exercising it, including information on the amount the consumer may be required to pay on the basis of the cancellation rules. |
(6) | That other information is available on request and what the nature of that information is. |
[Note: article 3(3)(b) of the Distance Marketing Directive] |
- 01/11/2007
Export chapter as
COBS 6
Information about the firm, its services and remuneration
COBS 6.1
Information about the firm and compensation information
- 01/11/2007
Application
COBS 6.1.1
See Notes
- (1) This section applies to a firm that carries on designated investment business for:
- (a) a retail client; and
- (b) in the case of MiFID or equivalent third country business, a client.
- (2) If expressly provided, this section also applies to ancillary services not covered by (1), but only in the course of MiFID or equivalent third country business carried on with or for a client.
- 01/11/2007
COBS 6.1.2
See Notes
- 01/11/2007
COBS 6.1.3
See Notes
- 01/11/2007
Information about a firm and its services
COBS 6.1.4
See Notes
A firm must provide a retail client with the following general information, if relevant:
- (1) the name and address of the firm, and the contact details necessary to enable a client to communicate effectively with the firm;
- (2) in the case of MiFID or equivalent third country business, the languages in which the client may communicate with the firm, and receive documents and other information from the firm;
- (3) the methods of communication to be used between the firm and the client including, where relevant, those for the sending and reception of orders;
- (4) a statement of the fact that the firm is authorised and the name of the competent authority that has authorised it;
- (5) in the case of MiFID or equivalent third country business, the contact address of the competent authority that has authorised the firm;
- (6) if the firm is acting through an appointed representative or, where applicable, a tied agent, a statement of this fact specifying the EEA State in which that appointed representative or tied agent is registered;
- (7) the nature, frequency and timing of the reports on the performance of the service to be provided by the firm to the client in accordance with the rules on reporting to clients on the provision of services (COBS 16);
- (8)
- (a) in the case of a common platform firm, a description, which may be provided in summary form, of the conflicts of interest policy;
- (b) other than in the case of a common platform firm, when a material interest or conflict of interest may or does arise, the manner in which the firm will ensure fair treatment of the client;
- (9) in the case of a common platform firm, at any time that the client requests it, further details of the conflicts of interest policy.
[Note: article 30(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 6.1.5
See Notes
- 01/11/2007
COBS 6.1.6
See Notes
- (1) A firm that manages investments for a client must establish an appropriate method of evaluation and comparison such as a meaningful benchmark, based on the investment objectives of the client and the types of designated investments included in the client portfolio, so as to enable the client to assess the firm's performance.
- (2) If a firm proposes to manage investments for a retail client, the firm must provide the client with such of the following information as is applicable:
- (a) information on the method and frequency of valuation of the designated investments in the client portfolio;
- (b) details of any delegation of the discretionary management of all or part of the designated investments or funds in the client portfolio;
- (c) a specification of any benchmark against which the performance of the client portfolio will be compared;
- (d) the types of designated investments that may be included in the client portfolio and types of transaction that may be carried out in those designated investments, including any limits; and
- (e) the management objectives, the level of risk to be reflected in the manager's exercise of discretion, and any specific constraints on that discretion.
[Note: articles 30(2) and (3) of the MiFID implementing Directive]
- 01/11/2007
Information concerning safeguarding of designated investments belonging to clients and client money
COBS 6.1.7
See Notes
- (1) A firm that holds designated investments or client money for a retail client subject to the custody chapter or the client money chapter must provide that client with the following information:
- (a) if applicable,
- (i) that the designated investments or client money of that client may be held by a third party on behalf of the firm;
- (ii) the responsibility of the firm under the applicable national law for any acts or omissions of the third party; and
- (iii) the consequences for the client of the insolvency of the third party;
- (b) if applicable, that the designated investments belonging to the retail client may be held in an omnibus account by a third party and a prominent warning of the resulting risks;
- (c) if it is not possible under national law for designated investments belonging to a client held with a third party to be separately identifiable from the proprietary designated investments of that third party or of the firm, that fact and a prominent warning of the resulting risks;
- (d) if applicable, that accounts that contain designated investments or client money belonging to that client are or will be subject to the law of a jurisdiction other than that of a EEA State, an indication that the rights of the client relating to those instruments or money may differ accordingly;
- (e) a summary description of the steps which it takes to ensure the protection of any designated investments belonging to the client or client money it holds, including summary details of any relevant investor compensation or deposit guarantee scheme which applies to the firm by virtue of its activities in an EEA State.
- (2) A firm that holds designated investments or client money for a retail client must inform the client:
- (a) if applicable, about the existence and the terms of any security interest or lien which the firm has or may have over the client's designated investments or client money, or any right of set-off it holds in relation to the client's designated investments or client money; and
- (b) if applicable, that a depositary may have a security interest or lien over, or right of set-off in relation to those instruments or money.
- (3) A firm within (1) must also, before entering into securities financing transactions in relation to designated investments held by it on behalf of a retail client, or before otherwise using such designated investments for its own account or the account of another client, in good time before the use of those designated investments provide the client, in a durable medium, with clear, full and accurate information on the obligations and responsibilities of the firm with respect to the use of those designated investments, including the terms for their restitution, and on the risks involved.
- (4) A firm within (1) that holds client designated investments or client money for a professional client must provide that client with the information in paragraphs (1)(d) and (2)(a) and(b).
[Note: articles 29(3), 30(1)(g) and 32 of the MiFID implementing Directive]
- 01/01/2009
- Past version of COBS 6.1.7 before 01/01/2009
Information about costs and associated charges
COBS 6.1.9
See Notes
A firm must provide a retail client with information on costs and associated charges including, if applicable:
- (1) the total price to be paid by the client in connection with the designated investment or the designated investment business or ancillary services, including all related fees, commissions, charges and expenses, and all taxes payable via the firm or, if an exact price cannot be indicated, the basis for the calculation of the total price so that the client can verify it. The commissions charged by the firm must be itemised separately in every case;
- (2) if any part of the total price referred to (1) is to be paid in or represents an amount of foreign currency, an indication of the currency involved and the applicable currency conversion rates and costs;
- (3) notice of the possibility that other costs, including taxes, related to transactions in connection with the designated investment or the designated investment business may arise for the client that are not paid via the firm or imposed by it; and
- (4) the arrangements for payment or other performance.
[Note: article 33 of the MiFID implementing Directive]
- 01/11/2007
COBS 6.1.10
See Notes
- 01/11/2007
Timing of disclosure
COBS 6.1.11
See Notes
- (1) A firm must provide a client with the information required by this section in good time before the provision of designated investment business or ancillary services unless otherwise provided by this rule.
- (2) A firm may instead provide that information immediately after starting to provide designated investment business or ancillary services if:
- (a) the firm was unable to comply with (1) because, at the request of the client, the agreement was concluded using a means of distance communication which prevented the firm from doing so; and
- (b) in any case where the rule on voice telephony communications (COBS 5.1.12 R) does not otherwise apply, the firm complies with that rule in relation to the retail client, as if that client were a consumer.
[Note: article 29(2), 29(3) and 29(5) of the MiFID implementing Directive]
- 01/11/2007
COBS 6.1.12
See Notes
- 01/11/2007
Medium of disclosure
COBS 6.1.13
See Notes
Except where expressly provided, a firm must provide the information required by this section in a durable medium or via a website (where it does not constitute a durable medium) where the website conditions are satisfied.
[Note: article 29(4) of the MiFID implementing Directive]
- 01/11/2007
Keeping the client up to date
COBS 6.1.14
See Notes
- (1) A firm must notify a client in good time about any material change to the information provided under this section which is relevant to a service that the firm is providing to that client.
- (2) A firm must provide this notification in a durable medium if the information to which it relates was given in a durable medium.
[Note: article 29(6) of the MiFID implementing Directive]
- 01/11/2007
Existing clients
COBS 6.1.15
See Notes
- (1) A firm need not treat each of several transactions in respect of the same type of financial instrument as a new or different service and so does not need to comply with the disclosure rules in this chapter in relation to each transaction.
- [Note: recital 50 to the MiFID implementing Directive]
- (2) But a firm should ensure that the client has received all relevant information in relation to a subsequent transaction, such as details of product charges that differ from those disclosed in respect of a previous transaction.
- 01/11/2007
Compensation information
COBS 6.1.16
See Notes
- (1) A firm carrying on MiFID business must make available to a client, who has used or intends to use those services, information necessary for the identification of the compensation scheme or any other investor-compensation scheme of which the firm is a member (including, if relevant, membership through a branch) or any alternative arrangement provided for in accordance with the Investor Compensation Directive.
- (2) The information under (1) must include the amount and scope of the cover offered by the compensation scheme and any rules laid down by the EEA State pursuant to article 2 (3) of the Investor Compensation Directive.
- (3) A firm must provide, on the client's request, information concerning the conditions governing compensation and the formalities which must be completed to obtain compensation.
- (4) The information provided for in this rule must be made available in a durable medium or via a website if the website conditions are satisfied in the official language or languages of the EEA State.
[Note: article 10(1) and (2) of the Investor Compensation Directive]
- 01/11/2007
Record keeping: information about the firm and compensation information
COBS 6.1.17
See Notes
- 01/11/2007
COBS 6.2
Describing the breadth of a firm's personal recommendations
- 01/11/2007
Application and introduction
COBS 6.2.1
See Notes
- 01/11/2007
COBS 6.2.2
See Notes
- 01/11/2007
COBS 6.2.3
See Notes
Under the territorial application rules in COBS 1, the rules in this section apply to:
- (1) a UK firm's business carried on from an establishment in an EEA State other than the United Kingdom for a retail client in the United Kingdom unless, the office from which the activity is carried on were a separate person, the activity:
- (a) would fall within the overseas persons exclusion in article 72 of the Regulated Activities Order; or
- (b) would not be regarded as carried on in the United Kingdom;
- (2) a firm's business carried on from an establishment in the United Kingdom carried on for a client in another EEA state.
- 01/11/2007
COBS 6.2.4
See Notes
- 01/11/2007
COBS 6.2.5
See Notes
- 01/11/2007
COBS 6.2.6
See Notes
In order to comply with the rule on information disclosure before providing services (COBS 2.2.1R (1)(a)) and, if applicable, the rule on information to be provided by an insurance intermediary (COBS 7.2.1 R (2)) a firm's disclosures to a client should include whether it expects its scope to be:
- (1) the whole of the market;
- (2) limited to several product providers;
- (3) limited to a single product provider.
- 01/11/2007
COBS 6.2.7
See Notes
- 01/11/2007
COBS 6.2.8
See Notes
- (1) If a firm holds itself out as independent or as otherwise giving personal recommendations to retail clients on packaged products from the whole market (or the whole of any sector of that market), the firm's selection for this purpose will need to be sufficiently large to satisfy the client's best interests rule and the fair, clear and not misleading rule.
- (2) A firm that gives personal recommendations on packaged products from the whole of a sector of the market may hold itself out as giving personal recommendations from the whole of that sector.
- 01/11/2007
COBS 6.2.9
See Notes
- 01/11/2007
COBS 6.2.10
See Notes
- 01/11/2007
Selling products from the scope and range
COBS 6.2.11
See Notes
In accordance with the client's best interests rule and the fair, clear and not misleading rule, a firm should not describe its services to a retail client as being based on a particular scope of advice and range unless its business processes are designed to ensure that:
- (1) its representatives consider, based on adequate knowledge, products from across that scope and range before making a personal recommendation;
- (2) it does not recommend products that are not in its scope or range;
- (3) each of its representatives who advise on packaged products is able to recommend and sell each product within the relevant range. However it may use a representative who is not competent to advise on and sell a product or category of product within the range if it:
- (a) prevents that representative from recommending that product or category of product; and
- (b) ensures that if a product ought to be recommended to a client, that client is referred to a representative that is competent to recommend it;
- (4) it does not narrow the scope it provides to a client compared with the scope it has disclosed to that client;
- (5) it does not alter the scope or range (where permitted under (4)) compared to the scope it has disclosed to a retail client without making a subsequent disclosure of its scope or range with appropriate content, presented with sufficient prominence, and in an appropriate format; and
- (6) it does not extend the scope or range in a way that materially alters its remuneration arrangements unless it provides to the client new and appropriate information on inducements, costs and charges (a firm may do this by providing a further services and costs disclosure document or combined initial disclosure document).
Records of scope and range
COBS 6.2.12
See Notes
- (1) A firm must make, and keep up to date, a record of the scope (or scopes) and the range (or ranges) it will use.
- (2) A firm must maintain a record of the particular scope and range on which its personal recommendation to each retail client is based.
- (3)
- (a) The record of the firm's scope and range (or ranges) must be retained for five years from the date on which it was superseded by a more up-to-date record.
- (b) The client-specific record required by (2) must be retained for five years from the date of the provision of the personal recommendation.
- 01/11/2007
COBS 6.2.13
See Notes
- 01/11/2007
Remuneration structure and referrals
COBS 6.2.14
See Notes
- 01/11/2007
Firms holding themselves out as independent
COBS 6.2.15
See Notes
- (1) A firm must not hold itself out to a client as acting independently unless it intends to:
- (a) provide personal recommendations to that client on packaged products from the whole market (or the whole of a sector of the market); and
- (b) offers the client the opportunity of paying a fee for the provision of such advice.
- (2) Paragraph (1) does not apply to group personal pension schemes if a firm discloses information to a client in accordance with the rule on group personal pension schemes (COBS 6.3.21 R).
- 01/11/2007
COBS 6.2.16
See Notes
- (1) A firm which charges a retail client a fee under COBS 6.2.15R (1)(b) must do so on the basis that it will, in respect of any commission which it receives in respect of transactions in packaged products for that client (and to which the particular fee charging arrangement relates), ensure the value of that commission is transferred to the client.
- (2) This rule does not prohibit such a firm from agreeing with the client (in writing) that it will retain an amount or rate of trail or renewal commission up to an amount each year specified in the agreement and so small, relative to the overall amount of fees paid by the client, that it would be manifestly disproportionate for the firm to be required to account to the client in one of the ways outlined in this rule.
- 01/11/2007
COBS 6.2.17
See Notes
COBS 6.2.18
See Notes
- 01/11/2007
COBS 6.2.19
See Notes
- 01/11/2007
COBS 6.3
Disclosing information about services, fees and commission - packaged products
- 01/11/2007
- Future version of COBS 6.3 after 31/12/2012
Application
COBS 6.3.1
See Notes
- 01/11/2007
COBS 6.3.2
See Notes
- 06/08/2008
- Past version of COBS 6.3.2 before 06/08/2008
Disclosure to retail clients in good time
COBS 6.3.3
See Notes
- (1) The rules referred to in (4) are derived from the Single Market directives and the Distance Marketing Directive. In the FSA's opinion, a firm may comply with them by ensuring that in good time before:
- (a) a retail client is bound by an agreement for the provision of a personal recommendation on packaged products; or
- (b) the firm performs an act preparatory to the provision of a personal recommendation;
- (c) (in relation to the amendment of a life policy for that retail client) it gives a personal recommendation in relation to packaged products;
- its representative provides the client with a services and costs disclosure document or combined initial disclosure document.
- (2) A firm should consider the extent to which it is appropriate to provide a services and costs disclosure document or a combined initial disclosure document if the appropriate information has been given to the client on a previous occasion and the information is still accurate and appropriate for the client.
- (3) A firm should provide the information required by this section in a durable medium.
- (4) For the purposes of (1), provision of a services and costs disclosure document or combined initial disclosure document will comply with:
- (a) the elements of the rule on summary disclosure of fees, commissions and non-monetary benefits (COBS 2.3.1R (2)(b), as qualified by COBS 2.3.2 R) that relate to disclosure of fees and commissions and, where included, non-monetary benefits;
- (b) the rule on information about costs and charges (COBS 6.1.9 R) but only if the hourly rates indicated in the services and costs disclosure document or combined initial disclosure document are actual hourly rates rather than indicative hourly rates;
- (c) the rule on information disclosure before providing services (COBS 2.2.1R (1)(a) and COBS 2.2.1R (1)(d));
- (d) the items of distance marketing information, set out in paragraphs (1), (2), (4), (5), (19) and (20) of COBS 5 Annex 1 R;
- (e) paragraphs (1) (so far as it relates to the firm's name and address), (4) and (6) of the rule on disclosure of information about a firm and its services (COBS 6.1.4 R);
- (f) the investor compensation scheme rule in COBS 6.1.16R (1) and (2); and
- (g) the rule on information to be provided by an insurance intermediary (COBS 7.2.1 R (1) and COBS 7.2.1 R (2)).
- (5) [deleted]
- (a) [deleted]
- (b) [deleted]
- (c) [deleted]
- (d) [deleted]
- (e) [deleted]
COBS 6.3.4
See Notes
- 06/08/2008
- Past version of COBS 6.3.4 before 06/08/2008
COBS 6.3.5
See Notes
- 06/08/2008
- Past version of COBS 6.3.5 before 06/08/2008
COBS 6.3.6
See Notes
- (1) A firm will satisfy the requirements as to timing in the rules referred to in COBS 6.3.3G (4) if its representative provides information to the client on first making contact with the client.
- (2) [deleted]
- 06/08/2008
- Past version of COBS 6.3.6 before 06/08/2008
Services and costs disclosure document and combined initial disclosure document
COBS 6.3.7
See Notes
- (1) A services and costs disclosure document is a document that contains the keyfacts logo, headings and text in the order shown in COBS 6 Annex 1 and in accordance with the Notes.
- (2) A combined initial disclosure document is a document that contains the keyfacts logo, headings and text in the order shown in COBS 6 Annex 2 and in accordance with the Notes.
- 06/08/2008
- Past version of COBS 6.3.7 before 06/08/2008
COBS 6.3.8
See Notes
A firm may include, in a services and costs disclosure document or a combined initial disclosure document, information required by COBS or by the rule on disclosing a tied agent's capacity (SUP 12.6.13 R) and which is not in the template for the services and costs disclosure document or combined initial disclosure document, if the information would be sufficiently prominent. For example, a firm may wish to use those documents to satisfy:
- (1) the parts of the rule on information about the firm and its services (COBS 6.1.4 R);
- (2) the rule on costs and associated charges (COBS 6.1.9 R);
- (3) the items of distance marketing information described in paragraphs (6), (8), (10) and (11) of COBS 5 Annex 1 R;
that would not otherwise be satisfied by providing the services and costs disclosure document or combined initial disclosure document.
- 06/08/2008
- Past version of COBS 6.3.8 before 06/08/2008
COBS 6.3.9
See Notes
- 06/08/2008
- Past version of COBS 6.3.9 before 06/08/2008
COBS 6.3.10
See Notes
- (1) [deleted]
- (2) [deleted]
COBS 6.3.11
See Notes
- (1) [deleted]
- (2) [deleted]
COBS 6.3.12
See Notes
[deleted]
- (1) [deleted]
- (2) [deleted]
- (3) [deleted]
COBS 6.3.14
See Notes
A firm would be unlikely to comply with the client's best interests rule and the fair, clear and not misleading rule, if:
- (1) the services and costs disclosure document or the combined initial disclosure document that it provided initially did not reflect relevant expected commission arrangements; or
- (2) the firm arranged to retain any commission which exceeded the amount or rate disclosed without first providing further appropriate inducements information and obtaining the client's prior informed consent to the proposed alteration in a durable medium.
Provision of information on request
COBS 6.3.17
See Notes
COBS 6.3.18
See Notes
- (1) [deleted]
- (2)
- (a) [deleted]
- (i) [deleted]
- (ii) [deleted]
- (b) [deleted]
Telephone sales
COBS 6.3.19
See Notes
COBS 6.3.20
See Notes
- (1) In accordance with the rule on information disclosure before providing services (COBS 2.2.1 R), if a firm's initial contact with a retail client with a view to providing a personal recommendation on packaged products is by telephone then the following information should be provided before proceeding further:
- (a) the name of the firm and, if the call is initiated by or on behalf of a firm, the commercial purpose of the call;
- (b) whether the firm offers packaged products from the whole market or from a limited number of companies or from a single company or a single group of companies;
- (c) whether the firm will provide the client with a personal recommendation on packaged products;
- (d) that the client can request a copy of the appropriate range of packaged products;
- (e) whether the firm offers a fee-based service, a commission-based service, a service based on a combination of fee and commission, or a combination of these services, and the consequences for the client of proceeding with each type of service; and
- (f) that the information given under (a) to (e) will subsequently be confirmed in writing.
- (2) If a firm's initial contact with a retail client is by telephone in circumstances in which the firm would otherwise provide a services and costs disclosure document, or a combined initial disclosure document, it should consider sending the client the document as soon as is reasonably practicable following the conclusion of the call.
Group Personal Pensions
COBS 6.3.21
See Notes
A firm must take reasonable steps to ensure that its representatives when making contact with an employee with a view to giving a personal recommendation on his employer's group personal pension scheme or stakeholder pension scheme, inform the employer:
- (1) that the firm will be providing a personal recommendation on group personal pension schemes and/or stakeholder pension schemes provided by the employer;
- (2) whether the employee will be provided with a personal recommendation that is restricted to the group personal pension scheme or stakeholder pension scheme provided by the employer or the recommendation will also cover other products;
- (3) the amount and nature of any payments that the employee will have to pay, directly or indirectly, for the personal recommendation.
COBS 6.3.22
See Notes
The payments that the employee would have to pay could be:
- (1) fees;
- (2) commission;
- (3) commission equivalent;
- (4) a combination of the above.
- 01/11/2007
COBS 6.4
Disclosure of charges, remuneration and commission
- 01/11/2007
Application
COBS 6.4.1
See Notes
COBS 6.4.2
See Notes
Under the territorial application rules in COBS 1, the rules in this section apply to:
- (1) a UK firm's business carried on from an establishment in an EEA State other than the United Kingdom for a retail client in the United Kingdom unless, if the office from which the activity is carried on were a separate person, the activity:
- (a) would fall within the overseas persons exclusion in article 72 of the Regulated Activities Order; or
- (b) would not be regarded as carried on in the United Kingdom.
- (2) a firm's business carried on from an establishment in the United Kingdom carried on for a client in an other EEA state.
- 01/11/2007
Disclosure of commission (or equivalent) for packaged products
COBS 6.4.3
See Notes
- (1) If a firm sells, personally recommends or arranges the sale of a packaged product to a retail client, and subsequently if the retail client requests it, the firm must disclose to the client in cash terms:
- (a) any commission receivable by it or any of its associates in connection with the transaction;
- (b) if the firm is also the product provider, any commission or commission equivalent payable in connection with the transaction; and
- (c) if the firm or any of its associates is in the same immediate group as the product provider, any commission equivalent in connection with the transaction.
- (2) Disclosure "in cash terms" in relation to commission does not include the value of any indirect benefits listed in the table at COBS 2.3.15 G.
- (3) In determining the amount to be disclosed as commission equivalent, a firm must put a proper value on the cash payments, benefits and services provided to its representatives in connection with the transaction.
- (4) This rule does not apply if:
- (a) the firm is acting as an investment manager; or
- (b) the retail client is not present in the EEA at the time of the transaction; or
- (c) the firm provides the client with a key features document, a simplified prospectus, a key investor information document or EEA key investor information document, in accordance with COBS 14, provided that the firm discloses to the client the actual amount or value of commission or equivalent within five business days of effecting the transaction.
- (5) If the terms of a packaged product are varied in a way that results in a material increase in commission or commission equivalent, a firm must disclose to a retail client in writing any consequent increase in commission or equivalent receivable by it in relation to that transaction.
COBS 6.4.4
See Notes
- 01/11/2007
COBS 6.4.5
See Notes
- (1) A firm must make the disclosure required by the rule on disclosure of commission or equivalent (COBS 6.4.3 R) as close as practicable to the time that it sells, personally recommends or arranges the sale of a packaged product.
- (2) The firm must make the disclosure:
- (a) in a durable medium; or
- (b) when a retail client does not make a written application to enter into a transaction, orally. In these circumstances, the firm must give written confirmation as soon as possible after the date of the transaction, and in any event within five business days.
COBS 6.4.6
See Notes
- (1) When determining the value of cash payments, benefits and services under the rule on disclosure of commission equivalent (COBS 6.4.3 R), a firm should follow the provisions of COBS 6 Annex 6.
- (2) Compliance with this evidential provision may be relied on as tending to establish compliance with COBS 6.4.3 R; and
- (3) Contravention of this evidential provision may be relied on as tending to establish contravention of COBS 6.4.3 R.
- 01/11/2007
Guidance on disclosure requirements for packaged products.
COBS 6.4.7
See Notes
A firm must not enter into an arrangement to pay commission other than to the firm responsible for a sale, unless:
- (1) the firm responsible for the sale has passed on its right to receive the commission to the recipient; or
- (2) another firm has given a personal recommendation to the same retail client after the sale; or
- (3) the commission is paid following the sale of a packaged product by the firm in response to a financial promotion communicated by that firm to a client of the recipient firm; or
- (4) the arrangement is with a firm in the same immediate group.
COBS 6.4.8
See Notes
- 01/11/2007
COBS 6.4.9
See Notes
COBS 6.4.10
See Notes
- 01/11/2007
COBS 6.4.11
See Notes
Commission or equivalent disclosure statements: content and wording | ||
A firm should consider including the following in its written statement of commission: | ||
(1) | Amounts or values of commission rounded as appropriate to help the client understand the document (for example, large amounts might be rounded to three significant figures). | |
(2) | The names of the firms involved in paying and receiving commission or commission equivalent. | |
(3) | A plain language description of whether remuneration takes the form of commission or commission equivalent. Commission equivalent could, for example, be described as "remuneration and services received from XYZ Ltd". | |
(4) | The timing of payments and period over which they are paid. | |
(5) | For payments relating to the client's fund, examples of how much money might be taken, such as: | |
(a) | where the commission or equivalent is on an increasing basis, the amount to be taken in the first and tenth year in which it is paid; or | |
(b) | where the commission or equivalent is a percentage of the fund, the amount that would taken if the fund was worth a certain value and the amount that would be taken if the fund was worth twice that value. |
- 01/11/2007
COBS 6 Annex 1
Services and costs disclosure document described in COBS 6.3.7G(1)
See Notes
Services and costs disclosure document described in COBS 6.3.7G(1) - COBS 6 Annex 1
COBS 6 Annex 2
Combined initial disclosure document described in COBS 6.3, ICOBS 4.5, MCOB 4.4.1R(1) and MCOB 4.10.2R(1)
If the