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) accepting deposits;
- (2) designated investment business;
- (3) long-term insurance business in relation to life policies;
and activities connected with them.
- 01/11/2007
Modifications to the general application rule
COBS 1.1.2
See Notes
- 01/11/2007
COBS 1.1.3
See Notes
- 01/11/2007
Guidance
COBS 1.1.4
See Notes
- 01/11/2007
COBS 1 Annex 1
Application (see COBS 1.1.2R)
- 01/11/2007
COBS 1 Annex 1
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 European Community 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 are those in COBS 14 (Providing product information to clients) relating to the distribution of a simplified prospectus by the management company. Those rules are the responsibility of the Home State of the UCITS. The Directive explicitly permits other EEA States in which a UCITS is marketed to continue to apply rules, including marketing and advertising rules, outside the field governed by the Directive. The Directive also applies certain rules derived from MiFID to management companies in relation to certain business activities. (See articles 1(6) and 44 of the UCITS Directive) | |
| 9.2 | G | Accordingly, the territorial scope of this sourcebook is modified so that: | |
| (1) | the rules relating to the distribution of a simplified prospectus apply to the management company (operator) of a UCITS whose Home State is the United Kingdom when marketing in other EEA States; | ||
| (2) | those rules do not apply to a management company of a UCITS whose Home State is another EEA State when marketing in the United Kingdom; other rules, such as the financial promotion rules and the information gathering and suitability rules (see COBS 9 Suitability (including basic advice)) apply without modification of this territorial scope, but subject to section 266 of the Act. | ||
| 9.3 | G | The Directive does not affect the territorial scope of rules as they apply to an intermediary selling a UCITS. | |
- 06/08/2008
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.
[Note: article 19(1) of MiFID]
- 01/11/2007
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]
- 06/08/2008
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
COBS 2.2.2
See Notes
- 01/11/2007
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.
- 06/02/2008
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]
- 01/11/2007
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
- 01/11/2007
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).
- 01/11/2007
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.
- 01/11/2007
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. | ||
- 01/11/2007
COBS 2.3.16
See Notes
- 01/11/2007
Record keeping: inducements
COBS 2.3.17
See Notes
- (1) In relation to its MiFID or equivalent third country business, a firm must make a record of each fee, commission or non-monetary benefit given to another firm that meets the criteria set out in 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.
- (2) A firm must make a record of each benefit given to another firm in accordance with COBS 2.3.14 G, 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]
- 01/11/2007
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
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
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 annual statement must be sent in accordance with Regulation 10 of the CTF Regulations.
- 01/11/2007
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
- 06/02/2008
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 European Community 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]
- 01/11/2007
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 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 4.1.2
See Notes
- 01/11/2007
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.
- 01/11/2007
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
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 a simplified prospectus that relates to a simplified prospectus scheme from another EEA State.
- (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.
- 01/11/2007
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 and recital 52 to the MiFID implementing Directive]
- 01/11/2007
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
COBS 4.2.5
See Notes
- 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]
- (2) In the case of a financial promotion that relates to the firm's MiFID or equivalent third country business, this rule does not apply to the extent that a financial promotion is a third party prospectus.
- (3) In the case of a financial promotion that does not relate to the firm's MiFID or equivalent third country business, this rule applies to communicating or approving a 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 deposit or to a pure protection contract that is a long-term care insurance contract.
- 01/11/2007
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 4.4.2
See Notes
- 01/11/2007
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) This section does not apply in relation to a communication that is made by a firm in relation to its MiFID or equivalent third country business:
- (a) to the extent that it is a third party prospectus; or
- (b) if it is image advertising.
- (3) This section does not apply in relation to a communication that is not made by a firm in relation to its MiFID or equivalent third country business:
- (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.
- 01/11/2007
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
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) a deposit other than a cash deposit ISA or a cash deposit CTF; or
- (b) a pure protection contract that is a long-term care insurance contract.
- 01/11/2007
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) a deposit; or
- (b) a pure protection contract that is a long-term care insurance contract.
- 01/11/2007
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) This section does not apply in relation to a communication by a firm in relation to its MiFID or equivalent third country business:
- (a) to the extent that the communication is a third party prospectus; or
- (b) if it is image advertising.
- (3) This section does not apply in relation to a communication bya firm other than in relation to its MiFID or equivalent third country business:
- (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.
- 06/02/2008
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
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 or simplified prospectus drawn up in accordance with COLL.
- 01/11/2007
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
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) This rule does not apply in relation to a communication made by a firm in relation to MiFID or equivalent third country business:
- (a) to the extent that it is a third party prospectus;
- (b) if it is image advertising.
- (4) This section does not apply in relation to a communication that is not made by a firm in relation to MiFID or equivalent third country business:
- (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.
- 06/02/2008
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 4.7.6
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 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) to the extent that the financial promotion relates to a deposit;
- (5) to the extent that the financial promotion relates to a pure protection contract that is a long-term care insurance contract.
- 01/11/2007
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 initiate a non-written financial promotion communicated to a particular person 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.
- 01/11/2007
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 financial promotions that relate 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) This section does not apply to a communication by a firm other than in relation to its MiFID or equivalent third country business:
- (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 deposit;
- (f) to the extent that it relates to a pure protection contract that is a long-term care insurance contract.
- 06/02/2008
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 no reason to doubt that the overseas person will deal with retail clients in the United Kingdom in an honest and reliable way.
- 01/11/2007
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
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) This rule does not apply in relation to a communication that is made by a firm in relation to its MiFID or equivalent third country business:
- (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) This rule does not apply in relation to a communication made by a firm other than in relation to MiFID or equivalent third country business:
- (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 deposit;
- (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]
- 01/11/2007
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.] | |
- 01/11/2007
COBS 4.12.2
See Notes
- 01/11/2007
COBS 5
Distance communications
COBS 5.1
The distance marketing disclosure rules
- 01/11/2007
Application
COBS 5.1.-1
See Notes
- 01/11/2007
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
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 the deposit or withdrawal of funds to or from a bank account and 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]
- 01/11/2007
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
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
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 MiFID custody chapter or the MiFID client money chapter and any third country investment firm that holds designated investments or client money for a retail client 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]
- 01/11/2007
COBS 6.1.8
See Notes
- 01/11/2007
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).
- 06/08/2008
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
- 06/01/2008
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
Application
COBS 6.3.1
See Notes
- 01/11/2007
COBS 6.3.2
See Notes
- 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]
- 06/08/2008
COBS 6.3.4
See Notes
- 06/08/2008
COBS 6.3.5
See Notes
- 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
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
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
COBS 6.3.9
See Notes
- 06/08/2008
COBS 6.3.10
See Notes
- (1) [deleted]
- (2) [deleted]
- 06/08/2008
COBS 6.3.11
See Notes
- (1) [deleted]
- (2) [deleted]
- 06/08/2008
COBS 6.3.12
See Notes
[deleted]
- (1) [deleted]
- (2) [deleted]
- (3) [deleted]
- 06/08/2008
COBS 6.3.13
See Notes
- 01/11/2007
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.
- 06/08/2008
COBS 6.3.15
See Notes
- 01/11/2007
COBS 6.3.16
See Notes
- 01/11/2007
Provision of information on request
COBS 6.3.17
See Notes
- 06/08/2008
COBS 6.3.18
See Notes
- (1) [deleted]
- (2)
- (a) [deleted]
- (i) [deleted]
- (ii) [deleted]
- (b) [deleted]
- 06/08/2008
Telephone sales
COBS 6.3.19
See Notes
- 06/08/2008
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.
- 06/08/2008
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.
- 01/11/2007
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
- 01/11/2007
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 or a simplified prospectus, 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.
- 01/11/2007
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.
- 01/11/2007
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.
- 01/11/2007
COBS 6.4.8
See Notes
- 01/11/2007
COBS 6.4.9
See Notes
- 01/11/2007
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)
- 06/08/2008
See Notes
Services and costs disclosure document described in COBS 6.3.7G(1) - COBS 6 Annex 1
- 06/08/2008
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)
- 06/08/2008
If the firm is not providing services in relation to all products, the parts of the combined initial disclosure document that are not relevant should be omitted.
Firms should omit the notes and square brackets that appear in the following combined initial disclosure document. The completed combined initial disclosure document should contain the keyfacts logo, headings and text in the order shown and in accordance with the notes. Subject to this, a firm may use its own house style and brand.
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) - COBS 6 Annex 2
- 06/08/2008
COBS 6 Annex 3
(Menu described in COBS 6.3)
- 01/11/2007
COBS 6 Annex 4
Identifying and describing the maximum rate of commission (or equivalent), the market average and the Example
- 01/11/2007
COBS 6 Annex 5
Calculation of a maximum rate of commission
- 01/11/2007
COBS 6 Annex 6
Calculating commission equivalent
- 01/11/2007
See Notes
| Calculating commission equivalent | ||
| This table sets out the basis on which the firm should determine the value of cash payments, benefits and services to be disclosed as commission equivalent. Benefits and services, as set out in parts B and C below, need be included only if their value is such that they could not be provided to a firm as a non-monetary benefit listed in the table in COBS 2.3.15 G. The result of the calculation should be that the amounts disclosed as commission equivalent are, as far as possible, the same as the amounts and value of commission which would be paid in a corresponding sale. | ||
| Part A: Cash payments | ||
| 1. | These cover all payments by a firm to a representative, appointed representative or, where applicable, a tied agent, or a firm in the same immediate group in relation to a transaction in a packaged product. This includes bonus payments, manager's overrides, extra earnings from other transactions and other payments conditional on amounts of new business. | |
| 2. | In determining the amounts to be included in the calculation, a firm should have regard to the following: | |
| (a) | when the precise rate of commission equivalent is not known in advance (for example, if retrospective volume overrides apply), the firm should estimate the rate likely to apply to the representative in question. When an identical commission equivalent scale applies to all representatives (although they might earn differing percentages of it), the same average amount of commission equivalent (and the value of other benefits and services) in respect of identical transactions may be disclosed, regardless of the percentage of the scale paid to each individual representative. Averaging should not be used for appointed representatives, or, where applicable, tied agents. | |
| (b) | all credits to an account from which periodic withdrawals may be made should be included. | |
| (c) | when a payment is made before the firm receives the premium or the investment monies to which it relates (for example, indemnity commission equivalent), it should be included as being received at the time of payment. Firms that wish to explain this arrangement to the clients are free to do so, provided this does not detract from the required disclosure. | |
| (d) | when the firm arranges for a third party to make a payment to a representative in exchange for the income stream to which the representative is entitled, or to make a loan to the representative on the security or expectation of future payments from the firm, this should be treated as if it were a payment from the firm at the time of the transaction. | |
| (e) | when a firm provides, or arranges for a third party to provide, a loan to a representative, on the security of, or in the expectation of, future payments from the firm, the amounts to be included are the payments to the representative on which the provision of the loan is based, as if they were received at the time the transaction was effected, irrespective of their actual timing. | |
| (f) | when an agent is employed and remunerated by the firm's appointed representative, or, where applicable, tied agent, the payments to be included should be those made by the firm to the appointed representative or tied agent, not those made by the appointed representative or tied agent to its own agent. | |
| Part B: Benefits | ||
| 3. | Benefits include the cost to the firm of all non-monetary benefits provided by it to a representative. A benefit should be included whether or not the representative is liable to income tax on it and whether it is chargeable to tax. Examples of benefits include the use of a car, attendance at conferences, subsidised loans, contributions to pension schemes, national insurance contributions, and the value of share option (taking into account any discount on issue and assuming that the shares in question grow at a reasonable rate in line with other investments). | |
| Part C: Services | ||
| 4. | Services include benefits which are not indirect benefits within the table in COBS 2.3.15 G. | |
| 5. | The following services should be included: | |
| (a) | office accommodation and equipment, including telephone, photocopying and fax; | |
| (b) | loans where a commercial rate of interest is not charged, including commission equivalent advances overdue for repayment; | |
| (c) | general stationery and mailing or distribution costs; | |
| (d) | computer hardware and software (except software which specifically relates to the firm's packaged product, such as software used for producing illustrations, projection and product information); | |
| (e) | clerical and administrative support; | |
| (f) | business insurance cover, including professional indemnity and fidelity guarantee; | |
| (g) | recruitment; | |
| (h) | compliance monitoring; | |
| (i) | client services; | |
| (j) | business planning services; | |
| (k) | line management. | |
| 6. | To put a value on these services, the following costs should be included: | |
| (a) | all overheads attributable to a particular cost item (for example, the cost of a compliance official); | |
| (b) | salary costs pro rata if individuals are only engaged part-time on relevant business; | |
| (c) | rent and associated premises costs at an appropriately reduced rate if the premises are also used for other business activities; | |
| (d) | only that proportion of the cost of lead generation promotions attributable to the generation of relevant business (but including the placing of any financial promotion, and its mailing or provision of access to third party clients); | |
| (e) | only the marginal additional compliance costs of ensuring that representatives and their support and training material comply with relevant rules; | |
| (f) | the commercial value of a service which is the use of an asset owned by the firm (for example in the case of a property, its full market rent); | |
| (g) | in respect of appointed representative, or, where applicable tied agent, the costs of any promotion in a newspaper or elsewhere and the provision of representative-specific literature in connection with a financial promotion; | |
| (h) | in respect of a firm in the same immediate group and connected appointed representatives or, where applicable, tied agents, where the name of the company is included in the financial promotion, the costs of any promotion in a newspaper or elsewhere and the provision of literature specific to the representative in connection with a financial promotion. | |
| 7. | The following costs should be excluded: | |
| (a) | the cost of corporate awareness advertising; | |
| (b) | training costs; | |
| (c) | costs of developing and maintaining computer systems for the provision of projections of benefits, client-specific key features documents, simplified prospectuses or other product information; | |
| (d) | costs of compensating clients; | |
| (e) | the costs of head office and branch level management and support, other than payments to managers falling under Part 1, for representatives, if these services could also be provided to a firm not in the same immediate group, for example, broker consultants and 'inspectors'. | |
| Part D: Calculation methodology | ||
| 8. | Estimating commission equivalent | |
| The cost of benefits and services should normally be based on the most recent relevant experience of the firm, except if the firm has grounds to believe that the commission equivalent for the period concerned will be higher or lower than that implied by the experience or no such experience is available. In such a case, the estimate should be based on and evidenced by business plans which the firm is satisfied are achievable. | ||
| 9. | Firms that receive or expect to receive: | |
| (a) | commission in respect of packaged products which are not its own products or the products of a product provider who is in the same immediate group; and | |
| (b) | commission equivalent in respect of its own products; | |
| must ensure that the costs and benefits attributed to these products do not exceed the amounts that can be financed from that commission. | ||
| Construction of commission equivalent scales | ||
| 10. | The total costs of cash payments, benefits and services should be assessed and the normal approach is to split them into new business costs and after sale servicing costs. The costs of each of these functions should be assessed directly in relation to the work carried out by the representatives. | |
| 11. | (a) | The total commission equivalent costs identified in 10 should be spread across the business using a new business commission equivalent scale and a servicing commission equivalent scale respectively. |
| (b) | The commission equivalent scales should distinguish between products for which the commission equivalent of representatives is likely to be different. | |
| 12. | If the representative's commission equivalent includes a cash payment related to volume and/or value of the transactions sold (which payment must be in accordance with the client's best interest rule), the following method would be appropriate: | |
| (a) | The payment scales should be grossed up by new business uplift factors or servicing uplift factors as appropriate to reflect the cost of benefits and services. The grossed up scales represent the new business and servicing commission equivalent scales, and are applied to each contract to derive the commission equivalent to be disclosed. | |
| (b) | If servicing costs are expected to be incurred in any year in which no servicing payments are to be made on a contract, disclosure should still be made, for example by using a technique similar to that described in 14. | |
| 13. | (a) | When a representative receives a salary, or other payment unrelated to volume or sales: |
| (i) this should be amalgamated with the cost of benefits and services; and | ||
| (ii) the total costs should be apportioned over individual transactions in a way that reflects the value of a contract to a firm or the firm's immediate group. | ||
| (b) | If a firm is a distributor for a product provider within the same immediate group, the firm must apportion total costs over individual transactions in a way that reflects the value of the contract to the firm's immediate group. | |
| 14. | If a representative agrees to forgo part of his or her normal payment to improve the terms of the contract, the disclosure may be reduced in such a way that fairly reflects the overall effect of the amount foregone. | |
| 15. | The firm should review the commission equivalent scales if at any time it becomes aware that the commission equivalent figures have become misleading. A review should take place at least annually. | |
| Payments to associates | ||
| 16. | If a firm pays commission equivalent to another firm in the same immediate group, or an appointed representative or, where applicable tied agent, which is an associate of the firm, it should ensure that the calculation of the sum to be disclosed is the higher of: | |
| (a) | all payments, benefits and services provided to the firm or appointed representative or tied agent, from whatever source, plus an additional allowance for profit of 15% - unless the firm can demonstrate that another figure (higher or lower) is more appropriate; and | |
| (b) | the cash payments actually paid by the firm, plus the value of services provided. | |
- 01/11/2007
COBS 7
Insurance mediation
COBS 7.1
Application
- 01/11/2007
COBS 7.1.1
See Notes
This chapter applies to a firm carrying on insurance mediation in relation to a life policy, but only if the State of the commitment is an EEA State.
[Note: articles 1 and 12 (4) and (5) of the Insurance Mediation Directive]
- 01/11/2007
COBS 7.2
Information to be provided by the insurance intermediary
- 01/11/2007
COBS 7.2.1
See Notes
- (1) Prior to the conclusion of any initial life policy and, if necessary, on amendment or renewal, a firm must provide a client with at least the following information:
- (a) its name and address;
- (b) the fact that it is registered on the FSA register and its FSA register number (or, if it is not on the FSA register , the register in which it has been included and the means for verifying that it has been registered);
- (c) whether it has a direct or indirect holding representing more than 10% of the voting rights or capital in a given insurance undertaking (that is not a pure reinsurer);
- (d) whether a given insurance undertaking (other than a pure reinsurer) or its parent undertaking has a direct or indirect holding representing more than 10% of the voting rights or capital in the firm; and
- (e) the procedures which allow a client and other interested parties to register complaints about the firm with the firm and the Financial Ombudsman Service or, if the Financial Ombudsman Service does not apply, information about the out-of-court complaint and redress procedures available for the settlement of disputes between the firm and its clients.
- (2) In addition, a firm must inform a client, concerning the life policy that is provided, whether:
- (a) it gives advice on the basis of a fair analysis of the market; or
- (b) it is contractually obliged to conduct its insurance mediation business exclusively with one or more insurance undertakings and, if that is the case, that the client can request the names of those insurance undertakings; or
- (c) it is not contractually obliged to conduct its insurance mediation business exclusively with one or more insurance undertakings and does not give advice on the basis of a fair analysis of the market and, if that is the case, that the client can request the names of the insurance undertakings with which the firm may and does conduct business.
- (3) If a client asks a firm to provide the names of the insurance undertakings with which the firm conducts, or may conduct, business (COBS 7.2.1 R (2)), the firm must provide it.
[Note: article 12(1) of the Insurance Mediation Directive]
- 01/11/2007
Interface with the services and costs disclosure document
COBS 7.2.2
See Notes
- 06/08/2008
COBS 7.2.2A
See Notes
- 01/11/2007
COBS 7.2.2B
See Notes
- 06/08/2008
Fair analysis for advised sales
COBS 7.2.3
See Notes
When a firm informs a client that it gives advice on the basis of a fair analysis of the market, it must give that advice on the basis of an analysis of a sufficiently large number of life policies available on the market to enable the firm to make a recommendation, in accordance with professional criteria, regarding which life policy would be adequate to meet the client's needs.
[Note: article 12(2) of the Insurance Mediation Directive]
- 01/11/2007
Specifying demands and needs
COBS 7.2.4
See Notes
- (1) Prior to the conclusion of any specific life policy, a firm must at least specify, in particular on the basis of the information provided by the client, the demands and needs of that client. Those demands and needs must be modulated according to the complexity of the relevant policy.
- (2) This rule does not apply when a firm makes a personal recommendation in relation to a life policy.
[Note: article 12(3) of the Insurance Mediation Directive]
- 01/11/2007
COBS 7.2.5
See Notes
- 01/11/2007
Means of communication to clients
COBS 7.2.6
See Notes
All information to be provided to a client in accordance with the rules in this chapter must be communicated:
- (1) in a durable medium available and accessible to the client;
- (2) in a clear and accurate manner, comprehensible to the client; and
- (3) in an official language of the State of the commitment or in any other language agreed by the parties.
[Note: article 13(1) of the Insurance Mediation Directive]
- 01/11/2007
Additional requirement: telephone selling
COBS 7.2.7
See Notes
In the case of telephone selling, the prior information given to a client must be in accordance with the distance marketing disclosure rules (COBS 5.1). Moreover, information must be provided to the client in accordance with the means of communication to clients rule (COBS 7.2.6 R) immediately after the conclusion of the life policy.
[Note: article 13(3) of the Insurance Mediation Directive]
- 01/11/2007
Exceptions: client request or immediate cover
COBS 7.2.8
See Notes
The information referred to in the means of communication to clients rule (COBS 7.2.6 R) may be provided orally where the client requests it, or where immediate cover is necessary. In those cases, the information must be provided to the client in accordance with that rule immediately after the conclusion of the life policy.
[Note: article 13(2) of the Insurance Mediation Directive]
- 01/11/2007
COBS 8
Client agreements
COBS 8.1
Client agreements: designated investment business
- 01/11/2007
Providing a client agreement
COBS 8.1.1
See Notes
- (1) This chapter applies to a firm in relation to designated investment business carried on for:
- (a) a retail client; and
- (b) in relation to MiFID or equivalent third country business, a professional client.
- (2) If expressly provided, this chapter also applies to a firm in relation to other ancillary services carried on for a client, but only in relation to its MiFID or equivalent third country business.
- (3) But this chapter does not apply to a firm to the extent that it is effecting contracts of insurance in relation to a life policy issued or to be issued by the firm as principal.
- 01/11/2007
COBS 8.1.2
See Notes
If a firm carries on designated investment business, other than advising on investments, with or for a new retail client, the firm must enter into a written basic agreement, on paper or other durable medium, with the client setting out the essential rights and obligations of the firm and the client.
[Note: article 39 of the MiFID implementing Directive]
- 01/11/2007
COBS 8.1.3
See Notes
- (1) A firm must, in good time before a retail client is bound by any agreement relating to designated investment business or ancillary services or before the provision of those services, whichever is the earlier, provide that client with:
- (a) the terms of any such agreement; and
- (b) the information about the firm and its services relating to that agreement or to those services required by COBS 6.1.4 R, including information on communications, conflicts of interest and authorised status.
- (2) A firm must provide the agreement and information in a durable medium or, where the website conditions are satisfied, otherwise via a website.
- (3) A firm may provide the agreement and the information immediately after the client is bound by any such agreement 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) if 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 he were a consumer.
- (4)
- (a) A firm must notify a client in good time about any material change to the information provided under this rule which is relevant to a service that the firm is providing to that client.
- (b) A firm must provide the notification in a durable medium if the information to which it relates was given in a durable medium.
[Note: article 29(1), (4), (5) and (6) of the MiFID implementing Directive]
- 01/11/2007
Record keeping: client agreements
COBS 8.1.4
See Notes
- (1) A firm must establish a record that includes the document or documents agreed between it and a client which set out the rights and obligations of the parties, and the other terms on which it will provide services to the client.
- (2) The record must be maintained for at least whichever is the longer of:
- (a) 5 years; or
- (b) the duration of the relationship with the client; or
- (c) in the case of a record relating to a pension transfer, pension opt-out or FSAVC, indefinitely.
[Note: article 19(7) of MiFID and article 51(1) of the MiFID implementing Directive. See article 51(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 8.1.5
See Notes
For the purposes of this chapter, a firm may incorporate the rights and duties of the parties into an agreement by referring to other documents or legal texts.
[Note: article 19(7) of MiFID and article 39 of the MiFID implementing Directive]
- 01/11/2007
COBS 8.1.6
See Notes
- 01/11/2007
COBS 9
Suitability (including basic advice)
COBS 9.1
Application and purpose provisions
- 01/11/2007
Making personal recommendations
COBS 9.1.1
See Notes
- 01/11/2007
Providing basic advice on a stakeholder product
COBS 9.1.2
See Notes
- 01/11/2007
Managing investments
COBS 9.1.3
See Notes
- 01/11/2007
Business which is not MiFID or equivalent third country business
COBS 9.1.4
See Notes
In respect of the business of a firm which is not MiFID or equivalent third country business, this chapter applies only if:
- (1) the client is a retail client; or
- (2) the firm is managing the assets of an occupational pension scheme, stakeholder pension scheme or personal pension scheme.
- 01/11/2007
Life policies for professional clients
COBS 9.1.5
See Notes
- 01/11/2007
COBS 9.1.6
See Notes
- 01/11/2007
COBS 9.1.7
See Notes
- 01/11/2007
Related rules
COBS 9.1.8
See Notes
- 01/11/2007
COBS 9.1.9
See Notes
- 01/11/2007
COBS 9.2
Assessing suitability
- 01/11/2007
Assessing suitability: the obligations
COBS 9.2.1
See Notes
- (1) A firm must take reasonable steps to ensure that a personal recommendation, or a decision to trade, is suitable for its client.
- (2) When making the personal recommendation or managing his investments, the firm must obtain the necessary information regarding the client's:
- (a) knowledge and experience in the investment field relevant to the specific type of designated investment or service;
- (b) financial situation; and
- (c) investment objectives;
- so as to enable the firm to make the recommendation, or take the decision, which is suitable for him.
[Note: article 19(4) of MiFID, article 12(2) of the Insurance Mediation Directive]
- 01/11/2007
COBS 9.2.2
See Notes
- (1) A firm must obtain from the client such information as is necessary for the firm to understand the essential facts about him and have a reasonable basis for believing, giving due consideration to the nature and extent of the service provided, that the specific transaction to be recommended, or entered into in the course of managing:
- (a) meets his investment objectives;
- (b) is such that he is able financially to bear any related investment risks consistent with his investment objectives; and
- (c) is such that he has the necessary experience and knowledge in order to understand the risks involved in the transaction or in the management of his portfolio.
- (2) The information regarding the investment objectives of a client must include, where relevant, information on the length of time for which he wishes to hold the investment, his preferences regarding risk taking, his risk profile, and the purposes of the investment.
- (3) The information regarding the financial situation of a client must include, where relevant, information on the source and extent of his regular income, his assets, including liquid assets, investments and real property, and his regular financial commitments.
[Note: articles 35(1), (3) and (4) of the MiFID implementing Directive]
- 01/11/2007
COBS 9.2.3
See Notes
The information regarding a client's knowledge and experience in the investment field includes, to the extent appropriate to the nature of the client, the nature and extent of the service to be provided and the type of product or transaction envisaged, including their complexity and the risks involved, information on:
- (1) the types of service, transaction and designated investment with which the client is familiar;
- (2) the nature, volume, frequency of the client's transactions in designated investments and the period over which they have been carried out;
- (3) the level of education, profession or relevant former profession of the client.
[Note: article 37(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 9.2.4
See Notes
A firm must not encourage a client not to provide information for the purposes of its assessment of suitability.
[Note: article 37(2) of the MiFID implementing Directive]
- 01/11/2007
Reliance on information
COBS 9.2.5
See Notes
A firm is entitled to rely on the information provided by its clients unless it is aware that the information is manifestly out of date, inaccurate or incomplete.
[Note: article 37(3) of the MiFID implementing Directive]
- 01/11/2007
Insufficient information
COBS 9.2.6
See Notes
If a firm does not obtain the necessary information to assess suitability, it must not make a personal recommendation to the client or take a decision to trade for him.
[Note: article 35(5) of the MiFID implementing Directive]
- 01/11/2007
COBS 9.2.7
See Notes
- 01/11/2007
Professional clients (MiFID and equivalent third country business)
COBS 9.2.8
See Notes
- (1) If a firm makes a personal recommendation or manages investments for a professional client in the course of MiFID or equivalent third country business, it is entitled to assume that, in relation to the products, transactions and services for which the professional client is so classified, the client has the necessary level of experience and knowledge for the purposes of COBS 9.2.2R (1)(c).
- (2) If the service consists of making a personal recommendation to a per se professional client, the firm is entitled to assume that the client is able financially to bear any related investment risks consistent with his investment objectives for the purposes of COBS 9.2.2R (1)(b).
[Note: article 35(2) of the MiFID implementing Directive]
- 01/11/2007
Friendly society life policies
COBS 9.2.9
See Notes
- (1) When recommending a small friendly society life policy, a firm, for the purpose of assessing suitability, need only obtain details of the net income and expenditure of the client and his dependants.
- (2) A friendly society life policy is small if the premium:
- (a) does not exceed £50 a year; or
- (b) if payable weekly, £1 a week.
- (3) The firm must keep for five years a record of the reasons why the recommendation is considered suitable.
- 01/11/2007
COBS 9.3
Guidance on assessing suitability
- 01/11/2007
COBS 9.3.1
See Notes
- (1) A transaction may be unsuitable for a client because of the risks of the designated investments involved, the type of transaction, the characteristics of the order or the frequency of the trading.
- (2) In the case of managing investments, a transaction might also be unsuitable if it would result in an unsuitable portfolio.
[Note: recital 57 to the MiFID implementing Directive]
- 01/11/2007
Churning and switching
COBS 9.3.2
See Notes
- (1) A series of transactions that are each suitable when viewed in isolation may be unsuitable if the recommendation or the decisions to trade are made with a frequency that is not in the best interests of the client.
- (2) A firm should have regard to the client's agreed investment strategy in determining the frequency of transactions. This would include, for example, the need to switch a client within or between packaged products.
[Note: recital 57 to the MiFID implementing Directive]
- 01/11/2007
Income withdrawals and short-term annuities
COBS 9.3.3
See Notes
When a firm is making a personal recommendation to a retail client about income withdrawals or purchase of short-term annuities, it should consider all the relevant circumstances including:
- (1) the client's investment objectives, need for tax-free cash and state of health;
- (2) current and future income requirements, existing pension assets and the relative importance of the plan, given the client's financial circumstances;
- (3) the client's attitude to risk, ensuring that any discrepancy is clearly explained between his attitude to an income withdrawal or purchase of a short-term annuity and other investments.
- 01/11/2007
Loans and mortgages
COBS 9.3.4
See Notes
- 01/11/2007
COBS 9.4
Suitability reports
- 01/11/2007
Providing a suitability report
COBS 9.4.1
See Notes
A firm must provide a suitability report to a retail client if the firm makes a personal recommendation to the client and the client:
- (1) acquires a holding in, or sells all or part of a holding in:
- (a) a regulated collective investment scheme;
- (b) an investment trust where the relevant shares have been or are to be acquired through an investment trust savings scheme;
- (c) an investment trust where the relevant shares are to be held within an ISA or PEP which has been promoted as the means for investing in one or more specific investment trusts; or
- (2) buys, sells, surrenders, converts or cancels rights under, or suspends contributions to, a personal pension scheme or a stakeholder pension scheme; or
- (3) elects to make income withdrawals or purchase a short-term annuity; or
- (4) enters into a pension transfer or pension opt-out.
[Note: article 19(8) of MiFID]
- 01/11/2007
COBS 9.4.2
See Notes
If a firm makes a personal recommendation in relation to a life policy, it must provide the client with a suitability report.
[Note: article 12(3) of the Insurance Mediation Directive]
- 01/11/2007
COBS 9.4.3
See Notes
The obligation to provide a suitability report does not apply:
- (1) if the firm, acting as an investment manager for a retail client, makes a personal recommendation relating to a regulated collective investment scheme;
- (2) if the client is habitually resident outside the EEA and the client is not present in the United Kingdom at the time of acknowledging consent to the proposal form to which the personal recommendation relates;
- (3) to any personal recommendation by a friendly society for a small life policy sold by it with a premium not exceeding £50 a year or, if payable weekly, £1 a week;
- (4) if the personal recommendation is to increase a regular premium to an existing contract;
- (5) if the personal recommendation is to invest additional single premiums or single contributions to an existing packaged product to which a single premium or single contribution has previously been paid.
- 01/11/2007
Timing
COBS 9.4.4
See Notes
A firm must provide the suitability report to the client:
- (1) in the case of a life policy, before the contract is concluded unless the necessary information is provided orally or immediate cover is necessary; or
- (2) in the case of a personal pension scheme or stakeholder pension scheme, where the rules on cancellation (COBS 15) require notification of the right to cancel, no later than the fourteenth day after the contract is concluded; or
- (3) in any other case, when or as soon as possible after the transaction is effected or executed.
[Note: article 12(3) of the Insurance Mediation Directive]
- 01/11/2007
COBS 9.4.5
See Notes
If, in respect of a life policy, the firm gives necessary information orally or gives immediate cover, it must provide a suitability report to the client in a durable medium immediately after the contract is concluded.
[Note: article 13(2) of the Insurance Mediation Directive]
- 01/11/2007
COBS 9.4.6
See Notes
In the case of telephone selling of a life policy, when the only contact between a firm and its client before conclusion of a contract is by telephone, the suitability report must:
- (1) comply with the distance marketing disclosure rules (COBS 5.1);
- (2) be provided immediately after the conclusion of the contract; and
- (3) be in a durable medium.
[Note: article 13(3) of the Insurance Mediation Directive]
- 01/11/2007
Contents
COBS 9.4.7
See Notes
- 01/11/2007
COBS 9.4.8
See Notes
A firm should give the client such details as are appropriate according to the complexity of the transaction.
[Note: article 12(3) of the Insurance Mediation Directive]
- 01/11/2007
COBS 9.4.9
See Notes
If a firm is providing a suitability report in the course of insurance mediation activity, the information must be provided:
- (1) in a durable medium which is available and accessible to the client;
- (2) in a clear and accurate manner, comprehensible to the client; and
- (3) in an official language of the State of the commitment in which the contract of insurance is made or in any other language agreed by the parties.
[Note: article 13 of the Insurance Mediation Directive]
- 01/11/2007
Additional content for income withdrawals
COBS 9.4.10
See Notes
When a firm is making a personal recommendation to a retail client about income withdrawals or purchase of short-term annuities, explanation of possible disadvantages in the suitability report should include the risk factors involved in entering into an income withdrawal or purchase of a short-term annuity. These may include:
- (1) the capital value of the fund may be eroded;
- (2) the investment returns may be less than those shown in the illustrations;
- (3) annuity or scheme pension rates may be at a worse level in the future;
- (4) when maximum withdrawals are taken or the maximum short-term annuity is purchased, high levels of income may not be sustainable;
- (5) the maximum income that can be withdrawn under an alternatively secured pension after age 75 is significantly less than the maximum that applies before age 75.
- 01/11/2007
COBS 9.5
Record keeping and retention periods for suitability records
- 01/11/2007
COBS 9.5.1
See Notes
- 01/11/2007
COBS 9.5.2
See Notes
A firm must retain its records relating to suitability for a minimum of the following periods:
- (1) if relating to a pension transfer, pension opt-out or FSAVC, indefinitely;
- (2) if relating to a life policy, personal pension scheme or stakeholder pension scheme, five years;
- (3) if relating to MiFID or equivalent third country business, five years; and
- (4) in any other case, three years.
- 01/11/2007
COBS 9.5.3
See Notes
A firm need not retain its records relating to suitability if:
- (1) the client does not proceed with the recommendation; and
- (2) they do not relate to MiFID or equivalent third country business.
- 01/11/2007
COBS 9.6
Special rules for giving basic advice on a stakeholder product
- 01/11/2007
COBS 9.6.1
See Notes
- 01/11/2007
Range
COBS 9.6.2
See Notes
- 01/11/2007
COBS 9.6.3
See Notes
A range of stakeholder products:
- (1) may include more than one deposit-based stakeholder product;
- (2) may include the stakeholder products of more than one stakeholder product provider;
- (3) must not include any more than one:
- (a) CIS stakeholder product or linked life stakeholder product; or
- (b) stakeholder CTF; or
- (c) stakeholder pension scheme.
- 01/11/2007
COBS 9.6.4
See Notes
When a firm provides basic advice it must:
- (1) explain why it chose the stakeholder products and stakeholder product providers that appear in the relevant range; and
- (2) give the client a list of the stakeholder products and stakeholder product providers that appear in that range;
if the client asks it do so.
- 01/11/2007
Requirements on first contact
COBS 9.6.5
See Notes
When a firm first has contact with a retail client with a view to giving basic advice on a stakeholder product, it must give the retail client:
- (1) the basic advice initial disclosure information (COBS 9 Annex 1), in a durable medium, together with an explanation of that information, unless:
- (a) it has already done so and the basic advice initial disclosure information is likely still to be accurate and appropriate; or
- (b) the contact is not face to face and is using a means of communication which makes it not practicable to provide the basic advice initial disclosure information in a durable medium; and
- (2) an explanation of how the advice will be paid for and the fact that any commission will be disclosed.
- 01/11/2007
COBS 9.6.6
See Notes
- (1) A firm may give a retail client the basic advice initial disclosure information (COBS 9 Annex 1) as part of:
- (a) a services and costs disclosure document; or
- (b) a combined initial disclosure document if it has reasonable grounds to believe that it will provide services relating to a stakeholder product and a non-investment insurance contract, a regulated mortgage contract, an equity release transaction or a home purchase plan.
- (2) If a firm provides a services and costs disclosure document or combined initial disclosure document to a retail client it will comply with the requirements under:
- (a) COBS 2.2.1R (1)(a) and COBS 2.2.1R (1)(d);
- (b) COBS 9.6.5R (1) and COBS 9 Annex 1;
- (c) the items of distance marketing information set out in paragraphs (1), (2), (4), (5) (19) and (20) of COBS 5 Annex 1 R; and
- (d) any duties that apply to it under the rule on information to be provided by the insurance intermediary (COBS 7.2.1 R (1) and (2)).
- 06/08/2008
COBS 9.6.7
See Notes
- 06/08/2008
COBS 9.6.8
See Notes
If a firm's first contact with a retail client is not face to face, it must:
- (1) inform the client at the outset:
- (a) (if the communication is initiated by or on behalf of a firm), of the name of the firm and the commercial purpose of the communication;
- (b) whether the firm will select from, or deal with, stakeholder products from a single provider, or from more than one provider;
- (c) that the firm will provide the retail client with basic advice without carrying out a full assessment of the retail client's needs and circumstances; and
- (d) that such information will be confirmed in writing; and
- (2) (if not provided at first contact) send the client the basic advice initial disclosure information (COBS 9 Annex 1) in a durable medium as soon as reasonably practicable following the conclusion of the first contact.
- 01/11/2007
Sales process
COBS 9.6.9
See Notes
When a firm gives basic advice, it must do so using:
- (1) a single range of stakeholder products; and
- (2) a sales process that includes putting pre-scripted questions to the client.
- 01/11/2007
COBS 9.6.10
See Notes
When a firm gives basic advice it must not:
- (1) describe or recommend a stakeholder product outside the firm's range; or
- (2) describe or recommend a smoothed linked long term stakeholder product; or
- (3) describe fund choice, or recommend a particular fund, if a stakeholder product offers a choice of funds; or
- (4) recommend the level of contributions required to be made to a stakeholder pension scheme to achieve a specific income in retirement; or
- (5) recommend or agree that a client makes a contribution to an ISA which exceeds the HM Revenue & Customs ISA limits.
- 01/11/2007
COBS 9.6.11
See Notes
- (1) If a firm starts the sales process for a stakeholder product that is not a deposit-based stakeholder product, it must not depart from that process unless it has advised the retail client that it will not provide basic advice on stakeholder products during the period of departure. A firm that does that must not provide basic advice during the departure period.
- (2) Before a firm returns to the sales process for stakeholder products, it must tell the retail client that that process is about to recommence.
- 01/11/2007
Suitability of recommendations
COBS 9.6.12
See Notes
A firm must only recommend a stakeholder product to a retail client if:
- (1) it has taken reasonable steps to assess the client's answers to the scripted questions and any other facts, circumstances or information disclosed by the client during the sales process;
- (2) (unless the relevant product is a deposit-based stakeholder product) having done so, it has reasonable grounds for believing that the stakeholder product is suitable for the client; and
- (3) the firm reasonably believes that the client understands the firm's advice and the basis on which it was provided.
- 01/11/2007
COBS 9.6.13
See Notes
- 01/11/2007
COBS 9.6.14
See Notes
If a firm giving basic advice recommends to a retail client to acquire a stakeholder product, it must ensure that, before the conclusion of the contract, its representative:
- (1) (unless the relevant product is a deposit-based stakeholder product) explains to the client, if necessary in summary form, but always in a way that will allow the client to make an informed decision about the firm's recommendation:
- (a) the nature of the stakeholder product; and
- (b) the "aims", "commitment" and "risks" sections of the appropriate key features document;
- (2) provides the client with a summary sheet, which is in a durable medium and sets out, for each product it recommends:
- (a) the specific amount the client wishes to pay into the product; and
- (b) the reasons for the recommendation, including the client's attitude to risk and any information provided by the client on which the recommendation is based; and
- (3) informs the client that in determining any subsequent complaint, the Ombudsman may take into account the limited information on which the recommendation was based and the fact that it was not tailored to take account of those aspects of the client's financial needs and circumstances not covered by the firm's sales process.
- 01/11/2007
COBS 9.6.15
See Notes
Notwithstanding COBS 9.6.14R (2) a firm may provide the summary sheet (COBS 9.6.14R (2)) as soon as reasonably practicable after the conclusion of the contract if the client asks it to do so, or the contract will be concluded using a means of distance communication that does not enable the provision of the summary sheet in a durable medium before the conclusion of the contract, but only if the firm:
- 01/11/2007
Concluding the contract
COBS 9.6.16
See Notes
- 01/11/2007
Basic advice on stakeholder products: other issues
COBS 9.6.17
See Notes
- (1) When a firm provides basic advice on a stakeholder product, it must not hold itself out as giving independent advice.
- (2) Nevertheless, a firm may still use the facilities and stationery it uses for other business in respect of which it does hold itself out as acting or advising independently.
- 01/11/2007
COBS 9.6.18
See Notes
A firm must ensure that none of its representatives:
- (1) is likely to be influenced by the structure of his or her remuneration to give unsuitable basic advice on stakeholder products to a retail client; or
- (2) refers a retail client to another firm in circumstances which would amount to the provision of any fee, commission or non-monetary benefit.
- 01/11/2007
Records
COBS 9.6.19
See Notes
- 01/11/2007
COBS 9.6.20
See Notes
- (1) A firm must make an up-to-date record of:
- (a) its scope of basic advice, and the scope of basic advice used by its appointed representatives (if any); and
- (b) its range (or ranges) of stakeholder products, and the range (or ranges) used by its appointed representatives (if any).
- (2) Those records must be retained for five years from the date on which they are replaced by a more up-to-date record.
- 01/11/2007
COBS 9 Annex 1
Basic advice initial disclosure information
- 01/11/2007
See Notes
| Information that comprises the following: | |
| 1. | the name and address (head office or principal place of business if more appropriate) of the firm; |
| 2. | a statement as to whether the range of stakeholder products on which advice will be given comprises products from a single stakeholder product provider, or a limited number of stakeholder product providers; |
| 3. | a statement that the service being offered is basic advice on a limited range of stakeholder products by asking questions about income, savings and other circumstances but without carrying out a full assessment of the retail client's needs and without offering advice on whether a non-stakeholder product may be more suitable; |
| 4. | a statement that the firm is authorised and regulated by the FSA (or if an appointed representative, a statement of whom it is an appointed representative and that that firm is authorised and regulated by the FSA) to give basic advice, together with the registration number of the firm and the fact that the firm's status can be checked with the FSA on 0845 730 0104 or on the FSA website at www.fsa.gov.uk; |
| 5. | a statement disclosing any product provider loans (where such credit exceeds 10% of share and loan capital) and direct or indirect ownership (where that ownership exceeds 10% of share capital or voting power) either by, or of, a single product provider or operator; (See also notes 20-23 in COBS 6 Annex 1 and notes 33-38 of COBS 6 Annex 2). |
| 6. | A description of the arrangements concerning complaints and the circumstances in which the retail client can refer the matter to the Financial Ombudsman Service; (See also notes 24-25 in COBS 6 Annex 1 and notes 39-42 of COBS 6 Annex 2). |
| 7. | a description of the circumstances and the extent to which firm is covered by the compensation scheme and the retail client will be entitled to compensation from the compensation scheme. (See also notes 26-27 of COBS 6 Annex 1 and notes 43-46 of COBS 6 Annex 2). |
| [Note: in respect of 1, 2, 4, 5, and 6, Articles 12 and 13 of the Insurance mediation directive and in respect of 7, Article 10 of the Investors compensation directive] | |
- 01/11/2007
COBS 9 Annex 2
Sales processes for stakeholder products
- 01/11/2007
See Notes
| General Standards - all sales | ||
| 1. | A sales process for stakeholder products may allow the representative administering it to depart from scripted questions where this is desirable to enable the retail client to better understand the points that need to be made provided this is compatible with the representative's competence and the degree of support offered by the firm's software and other systems. A software-based system is more likely to provide an adaptable means of providing prompts and support for representatives which may accordingly support a more flexible sales process. | |
| 2. | Questions, statements and warnings provided should be short, simple and in plain language. Questions should address one issue at a time. | |
| 3. | The sales process should enable the retail client to exit freely and without pressure at any stage. It should also allow the representative to terminate the process at any stage if it appears unlikely (for affordability, mis-match, risk or other reasons) that there is a suitable product for the retail client. | |
| 4. | Where necessary the sales process should incorporate procedures to allow uncertainties in the retail client's answers to be addressed before proceeding and should generally reflect caution about proceeding if clarification or further information cannot be obtained during the process (for example if a retail client cannot confirm whether he or she is eligible for membership of an occupational pension scheme). | |
| Preliminary - all sales | ||
| 5. | The retail client should be given the following preliminary information: | |
| (a) | the retail client will only be given basic advice about stakeholder products; | |
| (b) | stakeholder products are intended to provide a relatively simple and low-cost way of investing and saving; | |
| (c) | the range of stakeholder products on which the representative will give advice to that retail client; | |
| (d) | the retail client will be asked a series of questions about his or her needs and circumstances and, at the end of the procedure, he or she may be recommended to acquire a stakeholder product; | |
| (e) | the assessment of whether a stakeholder product is suitable will be made without a detailed assessment of the retail client's needs but will be based only on the information disclosed during the questioning process; and | |
| (f) | the retail client's answers will be noted and, at the end of the process, if a recommendation to acquire a stakeholder product is made, the retail client will be provided with a copy of the completed questionnaire. | |
| 6. | Following 5, the retail client should be asked if he or she wishes to proceed and, if not, the sales process should cease. | |
| Affordability - all sales | ||
| 7. | If it appears that the retail client is unlikely to be able to afford a stakeholder product, the sale should be terminated and the retail client given an explanation together with a copy of the questions and answers completed to that point. | |
| Financial Priorities and Debt - all sales | ||
| 8. | A retail client should be assessed to ascertain other possible financial priorities -for example, does the retail client need (a) insurance protection; (b) access to liquid cash to meet an emergency; or (c) to reduce existing debts? If appropriate, the retail client should be given an unambiguous warning about the desirability of meeting those priorities before acquiring a stakeholder product. | |
| 9. | A stronger warning about the desirability of addressing debt as a priority should be given if it appears that the retail client is significantly indebted, especially if there is a strong indication that the debt commitments may render any new commitment unaffordable in the short-term. For this purpose a firm should consider using a threshold or indicator to decide whether a retail client should be excluded on the basis of affordability. Examples may include where the retail client has (a) annual unsecured debt repayments in excess of 20% of gross annual income or (b) four or more active forms of unsecured debt or (c) has consistently reached his overdraft limit. A firm should review its chosen indicator or threshold regularly to ensure that it reflects prevailing economic conditions and takes account of industry best practice. | |
| 10. | A firm should clearly explain what it needs to know about a retail client's debt and consider using a range of alternative words (eg 'loans', 'student loans', 'borrowing' and 'other forms of credit') to ensure all relevant information is obtained. A firm may use a simple reckoner to assess retail client debt, but should be conscious of the nature of, and not give the impression that it is providing more than, basic advice. | |
| 11. | If a firm gives a warning about the desirability of meeting other priorities before acquiring a stakeholder product, or about affordability, it should also invite the retail client to consider terminating the sales process. | |
| Saving and investment objectives - all sales (except establishing a stakeholder CTF) | ||
| 12. | A retail client's savings and investment objectives, including the period over which the retail client wishes to save or invest, should be ascertained including whether the retail client: | |
| (a) | may need early access to some or all of the amount saved or invested; or | |
| (b) | wishes to save or invest for retirement; or | |
| (c) | wants to accumulate a specific sum by a specific date. | |
| 13. | If that information indicates that the retail client's objective is: | |
| (a) | to accumulate a specific sum by a specific date; or | |
| (b) | to save or invest only for the short term; or | |
| (c) | early access may be required to the whole of the sum saved or invested; | |
| the firm should not normally recommend a CIS stakeholder product, a linked life stakeholder product, a stakeholder pension scheme or topping up of a stakeholder CTF. | ||
| Tolerance of risk - all sales | ||
| 14. | If a retail client is not willing to accept any risk of the capital value of an investment being reduced then CIS stakeholder products, linked life stakeholder products and stakeholder CTFs should not usually be recommended. However, a firm may, if appropriate, explain the effect of inflation on long-term savings especially in relation to pensions and invite the retail client to consider his attitude to risk in the light of that explanation. | |
| 15. | If a retail client is willing to accept the risk of capital reduction in some circumstances but not others then, before any recommendation to acquire a CIS stakeholder product or linked life stakeholder product is made, the retail client should be reminded of the other circumstances in which he or she is unwilling to accept risk to capital. | |
| Stakeholder pensions | ||
| 16. | A stakeholder pension scheme should not be recommended, and the retail client should be advised to seek alternative or further advice, if it appears that the retail client: | |
| (a) | has or will have access to an occupational pension scheme; or | |
| (b) | is likely to view income in retirement from state benefits as sufficient; or | |
| (c) | already has a pension to which he or she could make further contributions; or | |
| (d) | wishes to retire within five years. | |
| 17. | It may also be appropriate to advise the retail client that other courses of action may be more beneficial than buying a stakeholder pension scheme (for example joining an occupational pension scheme). | |
| 18. | A firm designing a sales process for use in the workplace may take account of the benefits offered by the employer. If a firm recommends a stakeholder pension scheme on the basis of benefits provided by an employer, then it should explain the basis of the recommendation to the retail client and suggest that the retail client seek advice if he or she has any concerns. | |
| 19. | A firm should design its processes with a view to addressing the risk that retail clients will fail to appreciate the significance of questions about their pension provision and should accordingly incorporate a range of questions and information designed to foster the retail client's understanding of the issues and to elicit appropriate information. | |
| 20. | Retail client should be told that a stakeholder pension scheme is life-styled and what this means. | |
| 21. | A firm may provide a copy of the table setting out initial monthly pension amounts, found within the FSA's "Stakeholder pension decision tree" factsheet, in accordance with COBS 13 Annex 2 1.8R, but in doing so should also provide and explain the caveats and assumptions behind the table. A firm should make it clear that the decision on how much to invest is the retail client's responsibility and that he should get further advice if has any concerns. | |
| ISAs | ||
| 22. | A firm should ascertain whether the retail client has already opened a mini or maxi ISA and, if so, whether it would be appropriate for the retail client to open a non-ISA version of the same product. | |
- 01/11/2007
COBS 10
Appropriateness (for non-advised services)
COBS 10.1
Application and purpose provisions
- 01/11/2007
COBS 10.1.1
See Notes
- 01/11/2007
COBS 10.1.2
See Notes
- 01/11/2007
COBS 10.1.3
See Notes
- 01/11/2007
Related rules
COBS 10.1.4
See Notes
- 01/11/2007
COBS 10.2
Assessing appropriateness: the obligations
- 01/11/2007
COBS 10.2.1
See Notes
- (1) When providing a service to which this chapter applies, a firm must ask the client to provide information regarding his knowledge and experience in the investment field relevant to the specific type of product or service offered or demanded so as to enable the firm to assess whether the service or product envisaged is appropriate for the client.
- (2) When assessing appropriateness, a firm:
- (a) must determine whether the client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or service offered or demanded;
- (b) may assume that a professional client has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transaction or product, for which the client is classified as a professional client.
[Note: article 19(5) of MiFID and article 36 of the MiFID implementing Directive]
- 01/11/2007
COBS 10.2.2
See Notes
The information regarding a client's knowledge and experience in the investment field includes, to the extent appropriate to the nature of the client, the nature and extent of the service to be provided and the type of product or transaction envisaged, including their complexity and the risks involved, information on:
- (1) the types of service, transaction and designated investment with which the client is familiar;
- (2) the nature, volume, frequency of the client's transactions in designated investments and the period over which they have been carried out;
- (3) the level of education, profession or relevant former profession of the client.
[Note: article 37(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 10.2.3
See Notes
A firm must not encourage a client not to provide information required for the purposes of its assessment of appropriateness.
[Note: article 37(2) of the MiFID implementing Directive]
- 01/11/2007
Reliance on information
COBS 10.2.4
See Notes
A firm is entitled to rely on the information provided by a client unless it is aware that the information is manifestly out of date, inaccurate or incomplete.
[Note: article 37(3) of the MiFID implementing Directive]
- 01/11/2007
Use of existing information
COBS 10.2.5
See Notes
- 01/11/2007
Knowledge and experience
COBS 10.2.6
See Notes
- 01/11/2007
Increasing the client's understanding
COBS 10.2.7
See Notes
- 01/11/2007
No duty to communicate firm's assessment of knowledge and experience
COBS 10.2.8
See Notes
- 01/11/2007
COBS 10.3
Warning the client
- 01/11/2007
COBS 10.3.1
See Notes
- 01/11/2007
COBS 10.3.2
See Notes
- (1) If the client elects not to provide the information to enable the firm to assess appropriateness, or if he provides insufficient information regarding his knowledge and experience, the firm must warn the client that such a decision will not allow the firm to determine whether the service or product envisaged is appropriate for him.
- (2) This warning may be provided in a standardised format.
[Note: article 19(5) of MiFID]
- 01/11/2007
COBS 10.3.3
See Notes
- 01/11/2007
COBS 10.4
Assessing appropriateness: when it need not be done
- 01/11/2007
COBS 10.4.1
See Notes
- (1) A firm is not required to ask its client to provide information or assess appropriateness if:
- (a) the service only consists of execution and/or the reception and transmission of client orders, with or without ancillary services, it relates to particular financial instruments and is provided at the initiative of the client;
- (b) the client has been clearly informed (whether the warning is given in a standardised format or not) that in the provision of this service the firm is not required to assess the suitability of the instrument or service provided or offered and that therefore he does not benefit from the protection of the rules on assessing suitability; and
- (c) the firm complies with its obligations in relation to conflicts of interest.
- (2) The financial instruments are:
- (a) shares admitted to trading on a regulated market or an equivalent third country market (that is, one which is included in the list which is published by the European Commission and updated periodically); or
- (b) money market instruments, bonds or other forms of securitised debt (excluding those bonds or securitised debt that embed a derivative); or
- (c) units in a scheme authorised under the UCITS directive; or
- (d) other non-complex financial instruments.
- (3) A financial instrument is non-complex if it satisfies the following criteria:
- (a) it is not a derivative or other security giving the right to acquire or sell a transferable security or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures;
- (b) there are frequent opportunities to dispose of, redeem, or otherwise realise the instrument at prices that are publicly available to the market participants and that are either market prices or prices made available, or validated, by valuation systems independent of the issuer;
- (c) it does not involve any actual or potential liability for the client that exceeds the cost of acquiring the instrument; and
- (d) adequately comprehensive information on its characteristics is publicly available and is likely to be readily understood so as to enable the average retail client to make an informed judgment as to whether to enter into a transaction in that instrument.
[Note: article 19(6) of MiFID and article 38 of the MiFID implementing Directive]
- 01/11/2007
COBS 10.4.2
See Notes
If a client engages in a course of dealings involving a specific type of product or service through the services of a firm, the firm is not required to make a new assessment on the occasion of each separate transaction. A firm complies with the rules in this chapter provided that it makes the necessary appropriateness assessment before beginning that service.
[Note: recital 59 to the MiFID implementing Directive]
- 01/11/2007
COBS 10.4.3
See Notes
A client who has engaged in a course of dealings involving a specific type of product or service beginning before 1 November 2007 is presumed to have the necessary experience and knowledge in order to understand the risks involved in relation to that specific type of product or service.
[Note: recital 59 of the MiFID implementing Directive]
- 01/11/2007
COBS 10.5
Assessing appropriateness: guidance
- 01/11/2007
The initiative of the client
COBS 10.5.1
See Notes
A service should be considered to be provided at the initiative of a client (see COBS 10.4.1 R (1)(a)) unless the client demands it in response to a personalised communication from or on behalf of the firm to that particular client which contains an invitation or is intended to influence the client in respect of a specific financial instrument or specific transaction.
[Note: recital 30 to MiFID]
- 01/11/2007
COBS 10.5.2
See Notes
A service can be considered to be provided at the initiative of a client notwithstanding that the client demands it on the basis of any communication containing a promotion or offer of financial instruments made by any means that by its very nature is general and addressed to the public or a larger group or category of clients.
[Note: recital 30 to MiFID]
- 01/11/2007
Personalised communications
COBS 10.5.3
See Notes
- (1) Communications to the world at large, such as those in newspapers or on billboards, are likely to be by their very nature general and therefore not personalised communications.
- (2) Communications addressed to a client (such as, for example, an email, a telephone call or a letter), may or may not be personalised depending on the content.
- (3) A communication is not personalised solely because it contains the name and address of the client or because a mailing list has been filtered.
- (4) If a firm is satisfied that a communication does not contain any personalised content, it may wish to make clear that it does not intend the communication to be personalised and that the personal circumstances of the recipient have not been taken into account.
- 01/11/2007
Equivalent third country markets
COBS 10.5.4
See Notes
[to insert the reference or hypertext link to the list of equivalent third country markets when available]
[Note: article 19(6) of MiFID]
- 01/11/2007
Independent valuation systems
COBS 10.5.5
See Notes
The circumstances in which valuation systems will be independent of the issuer (see COBS 10.4.1 R (3)(b)) include where they are overseen by a depositary that is regulated as a provider of depositary services in a EEA State.
[Note: recital 61 to the MiFID implementing Directive]
- 01/11/2007
COBS 10.6
When a firm need not assess appropriateness
- 01/11/2007
COBS 10.6.1
See Notes
- 01/11/2007
COBS 10.6.2
See Notes
- 01/11/2007
COBS 10.7
Record keeping and retention periods for appropriateness records
- 01/11/2007
COBS 10.7.1
See Notes
- 01/11/2007
COBS 10.7.2
See Notes
- 01/11/2007
COBS 11
Dealing and managing
COBS 11.1
Application
- 01/11/2007
General application
COBS 11.1.1
See Notes
This chapter applies to a firm.
- (1) [deleted]
- (2) [deleted]
- 01/11/2007
COBS 11.1.2
See Notes
- 01/11/2007
Application to section on the use of dealing commission
COBS 11.1.3
See Notes
- 01/11/2007
Application of section on personal account dealing
COBS 11.1.4
See Notes
- 01/11/2007
COBS 11.1.5
See Notes
- 01/11/2007
Disapplication of best execution for non-financial spreads
COBS 11.1.6
See Notes
The section on best execution (COBS 11.2) does not apply to a firm when:
- (1) executing orders: or
- (2) placing orders with other entities for execution: or
- (3) transmitting orders to other entities for execution;
in relation to a spread-bet which is not a financial instrument, where the firm has not made a personal recommendation in relation to that spread-bet.
- 01/11/2007
COBS 11.2
Best execution
- 01/11/2007
Obligation to execute orders on terms most favourable to the client
COBS 11.2.1
See Notes
A firm must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account the execution factors.
[Note: The Committee of European Securities Regulators (CESR) has issued a Question and Answer paper on best execution under MiFID. This paper also incorporates the European Commission's response to CESR's questions regarding the scope of the best execution obligations under MiFID. The paper can be found at: http://www.cesr.eu/index.php?docid=4606]
- 01/11/2007
COBS 11.2.2
See Notes
The obligation to take all reasonable steps to obtain the best possible result for its clients (see COBS 11.2.1 R) should apply to a firm which owes contractual or agency obligations to the client.
[Note: recital 33 to MiFID]
- 01/11/2007
COBS 11.2.3
See Notes
Dealing on own account with clients by a firm should be considered as the execution of client orders, and therefore subject to the requirements under MiFID, in particular, those obligations in relation to best execution.
[Note: first sentence of recital 69 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.4
See Notes
If a firm provides a quote to a client and that quote would meet the firm's obligations to take all reasonable steps to obtain the best possible result for its clients if the firm executed that quote at the time the quote was provided, the firm will meet those same obligations if it executes its quote after the client accepts it, provided that, taking into account the changing market conditions and the time elapsed between the offer and acceptance of the quote, the quote is not manifestly out of date.
[Note: second sentence of recital 69 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.5
See Notes
The obligation to deliver the best possible result when executing client orders applies in relation to all types of financial instruments. However, given the differences in market structures or the structure of financial instruments, it may be difficult to identify and apply a uniform standard of and procedure for best execution that would be valid and effective for all classes of instrument. Best execution obligations should therefore be applied in a manner that takes into account the different circumstances associated with the execution of orders related to particular types of financial instruments. For example, transactions involving a customised OTC financial instrument that involve a unique contractual relationship tailored to the circumstances of the client and the firm may not be comparable for best execution purposes with transactions involving shares traded on centralised execution venues.
[Note: recital 70 to the MiFID implementing Directive]
- 01/11/2007
Best execution criteria
COBS 11.2.6
See Notes
When executing a client order, a firm must take into account the following criteria for determining the relative importance of the execution factors:
- (1) the characteristics of the client including the categorisation of the client as retail or professional;
- (2) the characteristics of the client order;
- (3) the characteristics of financial instruments that are the subject of that order;
- (4) the characteristics of the execution venues to which that order can be directed.
[Note: article 44(1) of the MiFID implementing Directive]
- 01/11/2007
Role of price
COBS 11.2.7
See Notes
Where a firm executes an order on behalf of a retail client, the best possible result must be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution, which must include all expenses incurred by the client which are directly related to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.
[Note: paragraph 1 of article 44(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.8
See Notes
For the purposes of ensuring that a firm obtains the best possible result for the client when executing a retail client order in the absence of specific client instructions, the firm should take into consideration all factors that will allow it to deliver the best possible result in terms of the total consideration, representing the price of the financial instrument and the costs related to execution. Speed, likelihood of execution and settlement, the size and nature of the order, market impact and any other implicit transaction costs may be given precedence over the immediate price and cost consideration only insofar as they are instrumental in delivering the best possible result in terms of the total consideration to the retail client.
[Note: recital 67 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.9
See Notes
- 01/11/2007
Delivering best execution where there are competing execution venues
COBS 11.2.10
See Notes
For the purposes of delivering best execution for a retail client where there is more than one competing venue to execute an order for a financial instrument, in order to assess and compare the results for the client that would be achieved by executing the order on each of the execution venues listed in the firm's order execution policy that is capable of executing that order, the firm's own commissions and costs for executing the order on each of the eligible execution venues must be taken into account in that assessment.
[Note: article 44(3) of paragraph 2 of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.11
See Notes
The obligation to deliver best execution for a retail client where there are competing execution venues is not intended to require a firm to compare the results that would be achieved for its client on the basis of its own execution policy and its own commissions and fees, with results that might be achieved for the same client by any other firm on the basis of a different execution policy or a different structure of commissions or fees. Nor is it intended to require a firm to compare the differences in its own commissions which are attributable to differences in the nature of the services that the firm provides to clients.
[Note: recital 71 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.12
See Notes
A firm must not structure or charge its commissions in such a way as to discriminate unfairly between execution venues.
[Note: article 44(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.13
See Notes
A firm would be considered to structure or charge its commissions in a way which discriminates unfairly between execution venues if it charges a different commission or spread to clients for execution on different execution venues and that difference does not reflect actual differences in the cost to the firm of executing on those venues.
[Note: recital 73 to the MiFID implementing Directive]
- 01/11/2007
Requirement for order execution arrangements including an order execution policy
COBS 11.2.14
See Notes
A firm must establish and implement effective arrangements for complying with the obligation to take all reasonable steps to obtain the best possible result for its clients. In particular, the firm must establish and implement an order execution policy to allow it to obtain, for its client orders, the best possible result in accordance with that obligation.
[Note: article 21(2) of MiFID]
- 01/11/2007
COBS 11.2.15
See Notes
The order execution policy must include, in respect of each class of financial instruments, information on the different execution venues where the firm executes its client orders and the factors affecting the choice of execution venue. It must at least include those execution venues that enable the firm to obtain on a consistent basis the best possible result for the execution of client orders.
[Note: paragraph 1 of article 21(3) of MiFID]
- 01/11/2007
COBS 11.2.16
See Notes
- (1) When establishing its execution policy, a firm should determine the relative importance of the execution factors, or at least establish the process by which it determines the relative importance of these factors, so that it can deliver the best possible result to its clients.
- (2) In order to give effect to that policy, a firm should select the execution venues that enable it to obtain on a consistent basis the best possible result for the execution of client orders.
- (3) A firm should apply its execution policy to each client order that it executes with a view to obtaining the best possible result for the client in accordance with that policy.
- (4) The obligation to take all reasonable steps to obtain the best possible result for the client should not be treated as requiring a firm to include in its execution policy all available execution venues.
[Note: recital 66 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.17
See Notes
The provisions of this section which provide that costs of execution include a firm's own commissions or fees charged to the client for the provision of an investment service should not apply for the purpose of determining what execution venues must be included in the firm's execution policy.
[Note: recital 72 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.18
See Notes
The provisions of this section as to execution policy are without prejudice to the general obligation of a firm to monitor the effectiveness of its order execution arrangements and policy and assess the execution venues in its execution policy on a regular basis.
[Note: recital 74 to the MiFID implementing Directive]
- 01/11/2007
Following specific instructions from a client
COBS 11.2.19
See Notes
- (1) Whenever there is a specific instruction from the client, the firm must execute the order following the specific instruction.
- [Note: article 21(1) of MiFID]
- (2) A firm satisfies its obligation under this section to take all reasonable steps to obtain the best possible result for a client to the extent that it executes an order, or a specific aspect of an order, following specific instructions from the client relating to the order or the specific aspect of the order.
- [Note: article 44(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.20
See Notes
When a firm executes an order following specific instructions from the client, it should be treated as having satisfied its best execution obligations only in respect of the part or aspect of the order to which the client instructions relate. The fact that the client has given specific instructions which cover one part or aspect of the order should not be treated as releasing the firm from its best execution obligations in respect of any other parts or aspects of the client order that are not covered by such instructions.
[Note: recital 68 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.21
See Notes
A firm should not induce a client to instruct it to execute an order in a particular way, by expressly indicating or implicitly suggesting the content of the instruction to the client, when the firm ought reasonably to know that an instruction to that effect is likely to prevent it from obtaining the best possible result for that client. However, this should not prevent a firm inviting a client to choose between two or more specified trading venues, provided that those venues are consistent with the execution policy of the firm.
[Note: recital 68 to the MiFID implementing Directive]
- 01/11/2007
Information about the order execution policy
COBS 11.2.22
See Notes
- 01/11/2007
COBS 11.2.23
See Notes
- (1) A firm must provide a retail client with the following details on its execution policy in good time prior to the provision of the service:
- (a) an account of the relative importance the firm assigns, in accordance with the execution criteria, to the execution factors, or the process by which the firm determines the relative importance of those factors;
- (b) a list of the execution venues on which the firm places significant reliance in meeting its obligation to take all reasonable steps to obtain on a consistent basis the best possible result for the execution of client orders;
- (c) a clear and prominent warning that any specific instructions from a client may prevent the firm from taking the steps that it has designed and implemented in its execution policy to obtain the best possible result for the execution of those orders in respect of the elements covered by those instructions.
- (2) This information must be provided in a durable medium, or by means of a website (where that does not constitute a durable medium) provided that the website conditions are satisfied.
[Note: article 46(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.24
See Notes
- 01/11/2007
Client consent to execution policy and execution of orders outside a regulated market or MTF
COBS 11.2.25
See Notes
- 01/11/2007
COBS 11.2.26
See Notes
A firm must obtain the prior express consent of its clients before proceeding to execute their orders outside a regulated market or an MTF. The firm may obtain this consent either in the form of a general agreement or in respect of individual transactions.
[Note: paragraph 3 of article 21(3) of MiFID]
- 01/11/2007
Monitoring the effectiveness of execution arrangements and policy
COBS 11.2.27
See Notes
A firm must monitor the effectiveness of its order execution arrangements and execution policy in order to identify and, where appropriate, correct any deficiencies. In particular, it must assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for the client or whether it needs to make changes to its execution arrangements. The firm must notify clients of any material changes to their order execution arrangements or execution policy.
[Note: article 21(4) of MiFID]
- 01/11/2007
Review of the order execution policy
COBS 11.2.28
See Notes
- (1) A firm must review annually its execution policy, as well as its order execution arrangements.
- (2) This review must also be carried out whenever a material change occurs that affects the firm's ability to continue to obtain the best possible result for the execution of its client orders on a consistent basis using the venues included in its execution policy.
[Note: article 46(1) of the MiFID implementing Directive]
- 01/11/2007
Demonstration of execution of orders in accordance with execution policy
COBS 11.2.29
See Notes
- 01/11/2007
Duty of portfolio managers and receivers and transmitters to act in clients' best interests
COBS 11.2.30
See Notes
A firm must, when providing the service of portfolio management, comply with the obligation to act in accordance with the best interests of its clients when placing orders with other entities for execution that result from decisions by the firm to deal in financial instruments on behalf of its client.
[Note: article 45(1) of MiFID implementing Directive]
- 01/11/2007
COBS 11.2.31
See Notes
A firm must, when providing the service of reception and transmission of orders, comply with the obligation to act in accordance with the best interests of its clients when transmitting client orders to other entities for execution.
[Note: article 45(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.32
See Notes
In order to comply with the obligation to act in accordance with the best interests of its clients when it places an order with, or transmits an order to, another entity for execution, a firm must:
[Note: article 45(3) of the MiFID implementing Directive]
- (1) take all reasonable steps to obtain the best possible result for its clients taking into account the execution factors. The relative importance of these factors must be determined by reference to the execution criteria and, for retail clients, to the requirement to determine the best possible result in terms of the total consideration (see COBS 11.2.7 R).
- A firm satisfies its obligation to act in accordance with the best interests of its clients, and is not required to take the steps mentioned above, to the extent that it follows specific instructions from its client when placing an order with, or transmitting an order to, another entity for execution;
- [Note: paragraph 1 and 2 of article 45(4) of the MiFID implementing Directive]
- (2) establish and implement a policy to enable it to comply with the obligation to take all reasonable steps to obtain the best possible result for its clients. The policy must identify, in respect of each class of instruments, the entities with which the orders are placed or to which the firm transmits orders for execution. The entities identified must have execution arrangements that enable the firm to comply with its obligations under this section when it places an order with, or transmits an order to, that entity for execution;
- [Note: paragraph 1 of article 45(5) of the MiFID implementing Directive]
- (3) provide appropriate information to its clients on the policy established in accordance with COBS 11.2.32R (2);
- [Note: paragraph 2 of article 45(5) of the MiFID implementing Directive]
- (4) monitor on a regular basis the effectiveness of the policy and, in particular, the execution quality of the entities identified in that policy and, where appropriate, correct any deficiencies; and
- [Note: first paragraph of article 45(6) of the MiFID implementing Directive]
- (5) review the policy annually. This review must also be carried out whenever a material change occurs that affects the firm's ability to continue to obtain the best possible result for its clients.
- [Note: second paragraph of article 45(6) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.33
See Notes
This section is not intended to require a duplication of effort as to best execution between a firm which provides the service of reception and transmission of orders or portfolio management and any firm to which that firm transmits its orders for execution.
[Note: recital 75 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.2.34
See Notes
The provisions applying to a firm which places orders with, or transmits orders to, other entities for execution (see COBS 11.2.30 R to COBS 11.2.33 G) will not apply when the firm which provides the service of portfolio management and/or service of reception and transmission of orders also executes the orders received or the decisions to deal on behalf of its client's portfolio. In those cases the requirements of this section for firms who execute orders apply (see COBS 11.2.1 R to COBS 11.2.29 R).
[Note: article 45(7) of the MiFID implementing Directive]
- 01/11/2007
COBS 11.3
Client order handling
- 01/11/2007
General principles
COBS 11.3.1
See Notes
- (1) A firm which is authorised to execute orders on behalf of clients must implement procedures and arrangements which provide for the prompt, fair and expeditious execution of client orders, relative to other orders or the trading interests of the firm.
- [Note: paragraph 1 of article 22(1) of MiFID]
- (2) These procedures or arrangements must allow for the execution of otherwise comparable orders in accordance with the time of their reception by the firm.
- [Note: paragraph 2 of article 22(1) of MiFID]
- 01/11/2007
COBS 11.3.2
See Notes
A firm must satisfy the following conditions when carrying out client orders:
- (1) it must ensure that orders executed on behalf of clients are promptly and accurately recorded and allocated;
- (2) it must carry out otherwise comparable orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the client require otherwise; and
- (3) it must inform a retail client about any material difficulty relevant to the proper carrying out of orders promptly upon becoming aware of the difficulty.
[Note: article 47(1) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.3
See Notes
For the purposes of the provisions of this section, orders should not be treated as otherwise comparable if they are received by different media and it would not be practicable for them to be treated sequentially.
[Note: recital 78 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.3.4
See Notes
Where a firm is responsible for overseeing or arranging the settlement of an executed order, it must take all reasonable steps to ensure that any client financial instruments or client funds received in settlement of that executed order are promptly and correctly delivered to the account of the appropriate client.
[Note: article 47(2) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.5
See Notes
A firm must not misuse information relating to pending client orders, and shall take all reasonable steps to prevent the misuse of such information by any of its relevant persons.
[Note: article 47(3) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.6
See Notes
Without prejudice to the Market Abuse Directive, for the purposes of the rule on the misuse of information (see COBS 11.3.5 R), any use by a firm of information relating to a pending client order in order to deal on own account in the financial instruments to which the client order relates, or in related financial instruments, should be considered a misuse of that information. However, the mere fact that market makers or bodies authorised to act as counterparties confine themselves to pursuing their legitimate business of buying and selling financial instruments, or that persons authorised to execute orders on behalf of third parties confine themselves to carrying out an order dutifully, should not in itself be deemed to constitute a misuse of information.
[Note: recital 78 to the MiFID implementing Directive]
- 01/11/2007
Aggregation and allocation of orders
COBS 11.3.7
See Notes
A firm is not permitted to carry out a client order or a transaction for own account in aggregation with another client order unless the following conditions are met:
- (1) it must be unlikely that the aggregation of orders and transactions will work overall to the disadvantage of any client whose order is to be aggregated;
- (2) it must be disclosed to each client whose order is to be aggregated that the effect of aggregation may work to its disadvantage in relation to a particular order;
- (3) an order allocation policy must be established and effectively implemented, providing in sufficiently precise terms for the fair allocation of aggregated orders and transactions, including how the volume and price of orders determines allocations and the treatment of partial executions.
[Note: article 48(1) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.8
See Notes
If a firm aggregates a client order with one or more other orders and the aggregated order is partially executed, it must allocate the related trades in accordance with its order allocation policy.
[Note: article 48(2) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
Aggregation and allocation of transactions for own account
COBS 11.3.9
See Notes
A firm which has aggregated transactions for own account with one or more client orders must not allocate the related trades in a way which is detrimental to a client.
[Note: article 49(1) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.10
See Notes
- (1) If a firm aggregates a client order with a transaction for own account and the aggregated order is partially executed, it must allocate the related trades to the client in priority to the firm.
- (2) However, if the firm is able to demonstrate on reasonable grounds that without the combination it would not have been able to carry out the order on such advantageous terms, or at all, it may allocate the transaction for own account proportionally, in accordance with its order allocation policy.
[Note: article 49(2) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.11
See Notes
A firm must, as part of its order allocation policy, put in place procedures to prevent the reallocation, in a way that is detrimental to the client, of transactions for own account which are executed in combination with client orders.
[Note: article 49(3) of the MiFID implementing Directive and article 19(1) of MiFID]
- 01/11/2007
COBS 11.3.12
See Notes
For the purposes of the provisions of this section, the reallocation of transactions should be considered as detrimental to a client if, as an effect of that reallocation, unfair precedence is given to the firm or to any particular person.
[Note: recital 77 to the MiFID implementing Directive]
- 01/11/2007
COBS 11.3.13
See Notes
In this section, carrying out client orders includes:
- (1) the execution of orders on behalf of clients;
- (2) the placing of orders with other entities for execution that result from decisions to deal in financial instruments on behalf of clients when providing the service of portfolio management;
- (3) the transmission of client orders to other entities for execution when providing the service of reception and transmission of orders.
- 01/11/2007
COBS 11.4
Client limit orders
- 01/11/2007
Obligation to make unexecuted client limit orders public
COBS 11.4.1
See Notes
Unless a client expressly instructs otherwise, a firm must, in the case of a client limit order in respect of shares admitted to trading on a regulated market which is not immediately executed under prevailing market conditions, take measures to facilitate the earliest possible execution of that order by making public immediately that client limit order in a manner which is easily accessible to other market participants.
[Note: article 22(2) of MiFID]
- 01/11/2007
COBS 11.4.2
See Notes
In respect of transactions executed between eligible counterparties, the obligation to disclose client limit orders should only apply where the counterparty is explicitly sending a limit order to a firm for its execution.
[Note: recital 42 to MiFID]
- 01/11/2007
How client limit orders may be made public
COBS 11.4.3
See Notes
[Note: article 31 of MiFID Regulation]
- 01/11/2007
COBS 11.4.4
See Notes
- 01/11/2007
Orders that are large in scale
COBS 11.4.5
See Notes
The obligation to make public a limit order will not apply to a limit order that is large in scale compared with normal market size.
[Note: article 22(2) of MiFID]
- 01/11/2007
COBS 11.4.6
See Notes
- 01/11/2007
COBS 11.5
Record keeping: client orders and transactions
- 01/11/2007
Record keeping of client orders and decisions to deal
COBS 11.5.1
See Notes
- (1) the name or other designation of the client;
- (2) the name or other designation of any relevant person acting on behalf of the client;
- (3) the details specified in point 4, 6, and in points 16 to 19, of Table 1 of Annex I;
- (4) the nature of the order if other than buy or sell;
- (5) the type of the order;
- (6) any other details, conditions and particular instructions from the client that specify how the order must be carried out;
- (7) the date and exact time of the receipt of the order, or of the decision to deal, by the investment firm.
[Note: article 7 of MiFID Regulation]
- 01/11/2007
Record-keeping of transactions
COBS 11.5.2
See Notes
- (1) the name or other designation of the client;
- (2) the details specified in points 2, 3, 4, 6, and in points 16 to 21, of Table 1 of Annex I;
- (3) the total price, being the product of the unit price and the quantity;
- (4) the nature of the transaction if other than buy or sell;
- (5) the natural person who executed the transaction or who is responsible for the execution.
[Note: article 8(1) of MiFID Regulation]
- 01/11/2007
COBS 11.5.3
See Notes
- (1) the name or other designation of the client whose order has been transmitted;
- (2) the name or other designation of the person to whom the order was transmitted;
- (3) the terms of the order transmitted;
- (4) the date and exact time of transmission.
[Note: article 8(2) of MiFID Regulation]
- 01/11/2007
COBS 11.5.4
See Notes
| 2. | Trading day | The trading day on which the transaction was executed. |
| 3. | Trading time | The time at which the transaction was executed, reported in the local time of the competent authority to which the transaction will be reported, and the basis in which the transaction is reported expressed as Co-ordinated Universal Time (UTC) +/- hours. |
| 4. | Buy/sell indicator | Identifies whether the transaction was a buy or sell from the perspective of the reporting investment firm or, in the case of a report to a client, of the client. |
| 6. | Instrument identification | This shall consist of:
-a unique code to be decided by the competent authority (if any) to which the report is made identifying the financial instrument which is the subject of the transaction;-if the financial instrument in question does not have a unique identification code, the report must include the name of the instrument or, in the case of a derivative contract, the characteristics of the contract.
|
| 16. | Unit price | The price per security or derivative contract excluding commission and (where relevant) accrued interest. In the case of a debt instrument, the price may be expressed either in terms of currency or as a percentage. |
| 17. | Price notation | The currency in which the price is expressed. If, in the case of a bond or other form of securitised debt, the price is expressed as a percentage, that percentage shall be included. |
| 18. | Quantity | The number of units of the financial instruments, the nominal value of bonds, or the number of derivative contracts included in the transaction. |
| 19. | Quantity notation | An indication as to whether the quantity is the number of units of financial instruments, the nominal value of bonds or the number of derivative contracts. |
| 20. | Counterparty | Identification of the counterparty to the transaction. That identification shall consist of:
-where the counterparty is an investment firm, a unique code for that firm, to be determined by the competent authority (if any) to which the report is made;-where the counterparty is a regulated market or MTF or an entity acting as its central counterparty, the unique harmonised identification code for that market, MTF or entity acting as central counterparty, as specified in the list published by the competent authority of the home Member State of that entity in accordance with Article 13(2);-where the counterparty is not an investment firm, a regulated market, an MTF or an entity acting as central counterparty, it should be identified as 'customer/client' of the investment firm which executed the transaction.
|
| 21. | Venue identification | Identification of the venue where the transaction was executed. That identification shall consist in:
-where the venue is a trading venue: its unique harmonised identification code;-otherwise: the code 'OTC'.
|
- 01/11/2007
COBS 11.6
Use of dealing commission
- 01/11/2007
COBS 11.6.1
See Notes
- 01/11/2007
Application
COBS 11.6.2
See Notes
This section applies to a firm that acts as an investment manager when it executes customer orders that relate to:
- (1) shares; and
- (2)
- (a) warrants;
- (b) certificates representing certain securities;
- (c) options; and
- (d) rights to or interests in investments of the nature referred to in (a) to (c);
- 01/11/2007
Use of dealing commission to purchase goods or services
COBS 11.6.3
See Notes
- (1) An investment manager must not accept goods or services in addition to the execution of its customer orders if it:
- (a) executes its customer orders through a broker or another person;
- (b) passes on the broker's or other person's charges to its customers; and
- (c) is offered goods or services in return for the charges referred to in (b).
- (2) This prohibition does not apply if the investment manager has reasonable grounds to be satisfied that the goods or services received in return for the charges:
- (a)
- (i) are related to the execution of trades on behalf of the investment manager's customers; or
- (ii) comprise the provision of research; and
- (b) will reasonably assist the investment manager in the provision of its services to its customers on whose behalf the orders are being executed and do not, and are not likely to, impair compliance with the duty of the investment manager to act in the best interests of its customers.
- 01/11/2007
COBS 11.6.4
See Notes
- (1) Where the goods or services relate to the execution of trades, an investment manager should have reasonable grounds to be satisfied that the requirements of the rule on use of dealing commission (COBS 11.6.3 R) are met if the goods or services are:
- (a) linked to the arranging and conclusion of a specific investment transaction (or series of related transactions); and
- (b) provided between the point at which the investment manager makes an investment or trading decision and the point at which the investment transaction (or series of related transactions) is concluded.
- (2) Compliance with (1) may be relied upon as tending to establish compliance with the rule on use of dealing commission (COBS 11.6.3 R)
- 01/11/2007
COBS 11.6.5
See Notes
- (1) Where the goods or services relate to the provision of research, an investment manager will have reasonable grounds to be satisfied that the requirements of the rule on use of dealing commission (COBS 11.6.3 R) are met if the research:
- (a) is capable of adding value to the investment or trading decisions by providing new insights that inform the investment manager when making such decisions about its customers' portfolios;
- (b) whatever form its output takes, represents original thought, in the critical and careful consideration and assessment of new and existing facts, and does not merely repeat or repackage what has been presented before;
- (c) has intellectual rigour and does not merely state what is commonplace or self-evident; and
- (d) involves analysis or manipulation of data to reach meaningful conclusions.
- (2) Compliance with (1) may be relied upon as tending to establish compliance with the rule on use of dealing commission (COBS 11.6.3 R).
- 01/11/2007
COBS 11.6.6
See Notes
- 01/11/2007
COBS 11.6.7
See Notes
- 01/11/2007
COBS 11.6.8
See Notes
Examples of goods or services that relate to the execution of trades or the provision of research that the FSA does not regard as meeting the requirements of either evidential provisions COBS 11.6.4 E or COBS 11.6.5 E include:
- (1) services relating to the valuation or performance measurement of portfolios;
- (2) computer hardware;
- (3) connectivity services such as electronic networks and dedicated telephone lines;
- (4) seminar fees;
- (5) subscriptions for publications;
- (6) travel, accommodation or entertainment costs;
- (7) order and execution management systems;
- (8) office administrative computer software, such as word processing or accounting programmes;
- (9) membership fees to professional associations;
- (10) purchase or rental of standard office equipment or ancillary facilities;
- (11) employees' salaries;
- (12) direct money payments;
- (13) publicly available information; and
- (14) custody services relating to designated investments belonging to, or managed for, customers other than those services that are incidental to the execution of trades.
- 01/11/2007
COBS 11.6.9
See Notes
- 01/11/2007
COBS 11.6.10
See Notes
- 01/11/2007
COBS 11.6.11
See Notes
- 01/11/2007
Rule on prior disclosure
COBS 11.6.12
See Notes
- 01/11/2007
Guidance on prior disclosure
COBS 11.6.13
See Notes
- 01/11/2007
COBS 11.6.14
See Notes
- (1) The prior disclosure required by this section should include an adequate disclosure of the firm's policy relating to the receipt of goods or services that relate to the execution of trades or the provision of research in accordance with the rule on use of dealing commission (COBS 11.6.3 R).
- (2) The prior disclosure should explain generally why the firm might find it necessary or desirable to use dealing commission to purchase goods or services, bearing in mind the practices in the markets in which it does business on behalf of its customers. While the appropriate method of making such a disclosure is for the firm to decide, this could, for example, be achieved in a client agreement.
- 01/11/2007
Rule on periodic disclosure
COBS 11.6.15
See Notes
- 01/11/2007
Adequate prior and periodic disclosure
COBS 11.6.16
See Notes
- 01/11/2007
COBS 11.6.17
See Notes
- 01/11/2007
Making periodic disclosures in a timely manner
COBS 11.6.18
See Notes
- (1) A firm will make periodic disclosure to its customers under this section in a timely manner if it is made at least once a year.
- (2) Compliance with (1) may be relied upon as tending to establish compliance with the rule on periodic disclosure (COBS 11.6.16 R).
- 01/11/2007
Record keeping
COBS 11.6.19
See Notes
- 01/11/2007
COBS 11.7
Personal account dealing
- 01/11/2007
Rule on personal account dealing
COBS 11.7.1
See Notes
A firm that conducts designated investment business must establish, implement and maintain adequate arrangements aimed at preventing the following activities in the case of any relevant person who is involved in activities that may give rise to a conflict of interest, or who has access to inside information as defined in the Market Abuse Directive or to other confidential information relating to clients or transactions with or for clients by virtue of an activity carried out by him on behalf of the firm:
- (1) entering into a personal transaction which meets at least one of the following criteria:
- (a) that person is prohibited from entering into it under the Market Abuse Directive;
- (b) it involves the misuse or improper disclosure of that confidential information;
- (c) it conflicts or is likely to conflict with an obligation of the firm to a customer under the regulatory system or any other obligation of the firm under MiFID;
- (2) advising or procuring, other than in the proper course of his employment or contract for services, any other person to enter into a transaction in designated investments which, if a personal transaction of the relevant person, would be covered by (1) or a relevant provision;
- (3) disclosing, other than in the normal course of his employment or contract for services, any information or opinion to any other person if the relevant person knows, or reasonably ought to know, that as a result of that disclosure that other person will or would be likely to take either of the following steps:
- (a) to enter into a transaction in designated investments which, if a personal transaction of the relevant person, would be covered by (1) or a relevant provision;
- (b) to advise or procure another person to enter into such a transaction.
[Note: article 12(1) of MiFID implementing Directive]
- 01/11/2007
COBS 11.7.2
See Notes
For the purposes of this section, the relevant provisions are:
- (1) the rules on personal transactions undertaken by financial analysts in COBS 12.2.5 R (1) and (2);
- (2) the rule on the misuse of information relating to pending client orders in COBS 11.3.5 R.
- 01/11/2007
COBS 11.7.2A
See Notes
- 01/11/2007
COBS 11.7.3
See Notes
- 01/11/2007
COBS 11.7.4
See Notes
The arrangements required under this section must in particular be designed to ensure that:
- (1) each relevant person covered by this section is aware of the restrictions on personal transactions, and of the measures established by the firm in connection with personal transactions and disclosure, in accordance with this section;
- (2) the firm:
- (a) is informed promptly of any personal transaction entered into by a relevant person, either by notification of that transaction or by other procedures enabling the firm to identify such transactions; or
- (b) in the case of outsourcing arrangements, ensures that the service provider to which the activity is outsourced maintains a record of personal transactions entered into by any relevant person and provides that information to the firm promptly on request;
- (3) a record is kept of the personal transaction notified to the firm or identified by it, including any authorisation or prohibition in connection with such a transaction.
[Note: article 12(2) of MiFID implementing Directive]
- 01/11/2007
Disapplication of rule on personal account dealing
COBS 11.7.5
See Notes
This section does not apply to the following kinds of personal transaction:
- (1) personal transactions effected under a discretionary portfolio management service where there is no prior communication in connection with the transaction between the portfolio manager and the relevant person or other person for whose account the transaction is executed;
- (2) personal transactions in units or shares in collective undertakings that comply with the conditions necessary to enjoy the rights conferred by the UCITS Directive or are subject to supervision under the law of an EEA State which requires an equivalent level of risk spreading in their assets, where the relevant person and any other person for whose account the transactions are effected, are not involved in the management of that undertaking;
- (3) personal transactions in life policies.
[Note: article 12(3) of MiFID implementing Directive]
- 01/11/2007
COBS 11.7.6
See Notes
For the purposes of this section, a person who is not:
- (1) a director, partner or equivalent, manager or appointed representative (or, where applicable, a tied agent) of the firm; or
- (2) a director, partner or equivalent, or manager of any appointed representative (or where applicable, a tied agent) of the firm;
will only be a relevant person to the extent that they are involved in the provision of designated investment business
- 01/11/2007
Successive personal transactions
COBS 11.7.7
See Notes
Where successive personal transactions are carried out on behalf of a person in accordance with prior instructions given by that person, the obligations under this section do not apply:
- (1) separately to each successive transaction if those instructions remain in force and unchanged; or
- (2) to the termination or withdrawal of such instructions, provided that any financial instruments which had previously been acquired pursuant to the instructions are not disposed of at the same time as the instructions terminate or are withdrawn.
Obligations under this section do apply in relation to a personal transaction, or the commencement of successive personal transactions, that are carried out on behalf of the same person if those instructions are changed or if new instructions are issued.
[Note: recital 17 to MiFID implementing Directive]
- 01/11/2007
COBS 12
Investment research
COBS 12.1
Purpose and application
- 01/11/2007
Purpose
COBS 12.1.1
See Notes
The purpose of this chapter is to:
- (1) set out specific requirements relating to the production and dissemination of investment research and non-independent research; and
- (2) implementing the provisions of the Market Abuse Directive relating to the disclosures to be made in, and about, research recommendations.
- 01/11/2007
Application: Who?
COBS 12.1.2
See Notes
This chapter applies to a firm.
- (1) [deleted]
- (2) [deleted]
- 01/11/2007
Application: Where?
COBS 12.1.3
See Notes
- 01/11/2007
COBS 12.2
Investment research
- 01/11/2007
Application
COBS 12.2.1
See Notes
This section applies to a firm which produces, or arranges for the production of, investment research that is intended or likely to be subsequently disseminated to clients of the firm or to the public, under its own responsibility or that of a member of its group.
[Note: article 25(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 12.2.2
See Notes
The concept of dissemination of investment research to clients or to the public is not intended to include dissemination exclusively to persons within the group of the firm.
[Note: recital 33 of the MiFID implementing Directive]
- 01/11/2007
Measures and arrangements required for investment research
COBS 12.2.3
See Notes
A firm must ensure the implementation of all of the measures for managing conflicts of interest in SYSC 10.1.11 R in relation to the financial analysts involved in the production of investment research and other relevant persons whose responsibilities or business interests may conflict with the interests of the persons to whom investment research is disseminated.
[Note: article 25 (1) of the MiFID implementing Directive]
- 01/11/2007
COBS 12.2.4
See Notes
Persons whose responsibilities or business interests may reasonably be considered to conflict with the interests of the persons to whom investment research is disseminated include corporate finance personnel and persons involved in sales and trading on behalf of clients or the firm.
[Note: recital 30 of the MiFID implementing Directive]
- 01/11/2007
COBS 12.2.5
See Notes
A firm must have in place arrangements designed to ensure that the following conditions are satisfied:
- (1) if a financial analyst or other relevant person has knowledge of the likely timing or content of investment research which is not publicly available or available to clients and cannot readily be inferred from information that is so available, that financial analyst or other relevant person must not undertake personal transactions or trade on behalf of any other person, including the firm, other than as market maker acting in good faith and in the ordinary course of market making or in the execution of an unsolicited client order, in financial instruments to which the investment research relates, or in any related financial instruments, until the recipients of the investment research have had a reasonable opportunity to act on it;
- [Note: article 25(2)(a) of the MiFID implementing Directive]
- (2) in circumstances not covered by (1), financial analyst and any other relevant persons involved in the production of investment research must not undertake personal transactions in financial instruments to which the investment research relates, or in any related financial instrument, contrary to current recommendations, except in exceptional circumstances and with the prior approval of a member of the firm's legal or compliance function;
- [Note: article 25(2)(b) of the MiFID implementing Directive]
- (3) the firm itself, financial analysts, and other relevant persons involved in the production of investment research must not accept inducements from those with a material interest in the subject matter of the investment research;
- [Note: article 25(2)(c) of the MiFID implementing Directive]
- (4) the firm itself, financial analysts, and other relevant persons involved in the production of investment research must not promise issuers favourable research coverage; and
- [Note: article 25(2)(d) of the MiFID implementing Directive]
- (5) issuers, relevant persons other than financial analysts, and any other persons must not, before the dissemination of investment research, be permitted to review a draft of the investment research for the purpose of verifying the accuracy of factual statements made in that investment research, or for any other purpose other than verifying compliance with the firm's legal obligations, if the draft includes a recommendation or a target price.
- [Note: article 25(2)(e) of the MiFID implementing Directive]
- 01/11/2007
COBS 12.2.5A
See Notes
- 01/11/2007
COBS 12.2.6
See Notes
- 01/11/2007
COBS 12.2.7
See Notes
For the purposes of COBS 12.2.5 R (2):
- (1) current recommendations should be considered to be those recommendations contained in investment research which have not been withdrawn and which have not lapsed; and
- [Note: recital 34 of the MiFID implementing Directive]
- (2) exceptional circumstances in which financial analysts and other relevant persons may, with prior written approval, undertake personal transactions in financial instruments to which investment research relates should include those circumstances where, for personal reasons relating to financial hardship, the financial analyst or other relevant person is required to liquidate a position.
- [Note: recital 31 of the MiFID implementing Directive]
- 01/11/2007
COBS 12.2.8
See Notes
Small gifts or minor hospitality below a level specified in the firm's conflicts of interest policy and mentioned in the description of that policy that is made available to clients in accordance with COBS 6.1.4 R (8) should not be considered as inducements for the purposes of COBS 12.2.5 R (3).
[Note: recital 32 of the MiFID implementing Directive]
- 01/11/2007
COBS 12.2.9
See Notes
A financial analyst should not become involved in activities other than the preparation of investment research where such involvement is inconsistent with the maintenance of the financial analysts objectivity. The following should ordinarily be considered as inconsistent with the maintenance of a financial analyst's objectivity:
- (1) participating in investment banking activities such as corporate finance business and underwriting; or
- (2) participating in 'pitches' for new business or 'road shows' for new issues of financial instruments; or
- (3) being otherwise involved in the preparation of issuer marketing.
[Note: recital 36 of the MiFID implementing Directive]
- 01/11/2007
Exemption from investment research measures and arrangements
COBS 12.2.10
See Notes
A firm which disseminates investment research produced by another person to the public or to clients is exempt from complying with the requirements in COBS 12.2.3 R and COBS 12.2.5 R if the following criteria are met:
- (1) the person that produces the investment research is not a member of the group to which the firm belongs;
- (2) the firm does not substantially alter the recommendations within the investment research;
- (3) the firm does not present the investment research as having been produced by it; and
- (4) the firm verifies that the producer of the investment research is subject to requirements equivalent to those in COBS 12.2.3 R and COBS 12.2.5 R in relation to the production of that investment research, or has established a policy setting such requirements.
[Note: article 25(3) of the MiFID implementing Directive]
- 01/11/2007
Means and timing of publication of investment research
COBS 12.2.11
See Notes
The FSA would expect a firm's conflicts of interest policy to provide for investment research to be published or distributed to its clients in an appropriate manner. For example, the FSA considers it will be:
- (1) appropriate for a firm to take reasonable steps to ensure that its investment research is published or distributed only through its usual distribution channels; and
- (2) inappropriate for an employee (whether or not a financial analyst) to communicate the substance of any investment research, except as set out in the firm's conflicts of interest policy.
- 01/11/2007
COBS 12.2.12
See Notes
- 01/11/2007
Investment research for internal use
COBS 12.2.13
See Notes
- 01/11/2007
COBS 12.3
Non-independent research
- 01/11/2007
Application
COBS 12.3.1
See Notes
This section applies to a firm that produces or disseminates non-independent research.
[Note: article 24(2) of the MiFID implementing Directive]
- 01/11/2007
Labelling of non-independent research
COBS 12.3.2
See Notes
A firm which produces or disseminates non-independent research must ensure that it:
- (1) is clearly identified as a marketing communication; and
- (2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it:
- (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and
- (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
[Note: article 24(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 12.3.3
See Notes
The financial promotion rules apply to non-independent research as though it were a marketing communication.
[Note: article 24(2) of the MiFID implementing Directive]
- 01/11/2007
Management of conflicts of interest in area of non-independent research
COBS 12.3.4
See Notes
In accordance with SYSC 10, a firm will be expected to take reasonable steps to identify and manage conflicts of interest which may arise in the production of non-independent research. Situations where conflicts of interest can arise include:
- (1) relevant persons trading in financial instruments that are the subject of non-independent research which they know the firm has published or intends to publish before clients have had a reasonable opportunity to act on it (other than when the firm is acting as market maker in good faith and in the ordinary course of market making, or in the execution of an unsolicited client order); and
- (2) preparation of non-independent research which is intended firstly for internal use by the firm and then for later publication to clients.
- 01/11/2007
COBS 12.4
Research recommendations: required disclosures
- 01/11/2007
Application
COBS 12.4.1
See Notes
- (1) This section applies to a firm that prepares or disseminates research recommendations.
- (2) This section does not apply to the extent that the Investment Recommendation (Media) Regulations 2005 apply to a firm.
- (3) If a firm is a media firm subject to equivalent appropriate regulation, only COBS 12.4.2 G, COBS 12.4.4 R, COBS 12.4.15 R and COBS 12.4.16 R apply.
[Note: articles 2(4), 3(4), 5(5) of the MAD Investment Recommendations Directive]
- 01/11/2007
COBS 12.4.2
See Notes
- 01/11/2007
Use of information barriers
COBS 12.4.3
See Notes
Obligations to disclose information do not require those producing research recommendations to breach effective information barriers put in place to prevent and avoid conflicts of interest.
[Note: recital 7 of the MAD Investment Recommendations Directive]
- 01/11/2007
Fair presentation and disclosure
COBS 12.4.4
See Notes
A firm must take reasonable care:
- (1) to ensure that a research recommendation produced or disseminated by it is fairly presented; and
- (2) to disclose its interests or indicate conflicts of interest concerning relevant investments.
[Note: article 6(5) of the Market Abuse Directive]
- 01/11/2007
Identity of producers of recommendations
COBS 12.4.5
See Notes
- (1) A firm must, in a research recommendation produced by it:
- (a) disclose clearly and prominently the identity of the person responsible for its production, and in particular:
- (i) the name and job title of the individual who prepared the research recommendation; and
- (ii) the name of the firm; and
- (b) (where the firm is an investment firm or a credit institution) disclose the identity of the competent authority of the firm.
- (2) The requirements in (1) may be met for non-written research recommendations by referring to a place where the disclosures can be directly and easily accessed by the public, such as an appropriate internet site of the firm.
[Note: article 2 of the MAD Investment Recommendations Directive]
- 01/11/2007
General standard for fair presentation of recommendations
COBS 12.4.6
See Notes
- (1) A firm must take reasonable care to ensure that:
- (a) facts in a research recommendation are clearly distinguished from interpretations, estimates, opinions and other types of non-factual information;
- (b) its sources for a research recommendation are reliable or if there is any doubt as to whether a source is reliable, this is clearly indicated;
- (c) all projections, forecasts and price targets in a research recommendation are clearly labelled as such and the material assumptions made in producing or using them are indicated; and
- (d) the substance of its research recommendations can be substantiated as reasonable, upon request by the FSA.
- (2) The requirements in (1) do not apply, in the case of non-written research recommendations, to the extent that they would be disproportionate.
- (3) A firm must make and retain sufficient records to disclose the basis of the substantiation required in (1)(d).
[Note: article 3 of the MAD Investment Recommendations Directive]
- 01/11/2007
Additional obligations in relation to fair presentation of recommendations
COBS 12.4.7
See Notes
- (1) In addition a firm must take reasonable care to ensure that, in a research recommendation, at least:
- (a) all substantially material sources are indicated, including, if appropriate, the issuer, and in particular the research recommendation indicates whether the research recommendation has been disclosed to that issuer and amended following this disclosure before its dissemination;
- (b) any basis of valuation or methodology used to evaluate a security, a derivative or an issuer, or to set a price target for a security or a derivative, is adequately summarised;
- (c) the meaning of any recommendation made, such as "buy", "sell" or "hold", which may include the time horizon of the security or derivative to which the research recommendation relates, is adequately explained and any appropriate risk warning, including a sensitivity analysis of the relevant assumptions, indicated;
- (d) reference is made to the planned frequency, if any, of updates of the research recommendation and to any major changes in the coverage policy previously announced;
- (e) the date at which the research recommendation was first released for distribution is indicated clearly and prominently, as well as the relevant date and time for any security or derivative price mentioned; and
- (f) if the substance of a research recommendation differs from the substance of an earlier research recommendation, concerning the same security, derivative or issuer issued during the 12-month period immediately preceding its release, this change and the date of the earlier research recommendation are indicated clearly and prominently.
- (2) If the requirements in (1)(a), (b) or (c) would be disproportionate in relation to the length of the research recommendation, a firm may, instead, make clear and prominent reference in the research recommendation to the place where the required information can be directly and easily accessed by the public (such as a hyperlink to that information on an appropriate internet site of the firm) provided that there has been no change in the methodology or basis of valuation used.
- (3) In the case of a non-written research recommendation, the requirements of (1) do not apply to the extent that they would be disproportionate.
[Note: article 4 of the MAD Investment Recommendations Directive]
- 01/11/2007
COBS 12.4.8
See Notes
- 01/11/2007
General standard for disclosure of interests and conflicts of interest
COBS 12.4.9
See Notes
- (1) A firm must disclose, in a research recommendation:
- (a) all of its relationships and circumstances that may reasonably be expected to impair the objectivity of the research recommendation, in particular a significant financial interest in any relevant investment which is the subject of the research recommendation, or a significant conflict of interest with respect to a relevant issuer; and
- (b) relationships and circumstances, of the sort referred to in (a), of each legal or natural person working for the firm who was involved in preparing the substance of the research recommendation, including, in particular, for a firm which is an investment firm, disclosure of whether his remuneration is tied to investment banking transactions performed by the firm or any affiliated company.
- (2) If the firm is a legal person, the information to be disclosed in accordance with (1) must at least include the following:
- (a) any interests or conflicts of interest of the firm or of an affiliated company that are accessible, or reasonably expected to be accessible, to the persons involved in the preparation of the substance of the research recommendation; and
- (b) any interests or conflicts of interest of the firm or of affiliated companies known to persons who, although not involved in the preparation of the substance of the research recommendation, had or could reasonably be expected to have access to the substance of the research recommendation prior to its dissemination, other than persons whose only access to the research recommendation is to ensure compliance with relevant regulatory or statutory obligations, including the disclosures required under this section.
- (3) If the disclosures required under (1) and (2) would be disproportionate in relation to the length of the research recommendation distributed, a firm may, instead, make clear and prominent reference in the research recommendation to the place where such disclosures can be directly and easily accessed by the public (such as a hyperlink to the disclosure on an appropriate internet site of the firm).
- (4) The requirements in (1) do not apply, in the case of non-written research recommendations, to the extent that they are disproportionate.
[Note: article 5 of the MAD Investment Recommendations Directive]
- 01/11/2007
Additional obligations for producers of research recommendations in relation to disclosure of interests or conflicts of interest
COBS 12.4.10
See Notes
- (1) A research recommendation produced by a firm must disclose clearly and prominently the following information on its interests and conflicts of interest:
- (a) major shareholdings that exist between it or any affiliated company on the one hand and the relevant issuer on the other hand, including at least:
- (i) shareholdings exceeding 5% of the total issued share capital in the relevant issuer held by the firm or any affiliated company; or
- (ii) shareholdings exceeding 5% of the total issued share capital of the firm or any affiliated company held by the relevant issuer;
- (b) any other financial interests held by the firm or any affiliated company in relation to the relevant issuer which are significant in relation to the research recommendation;
- (c) if applicable, a statement that the firm or any affiliated company is a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives;
- (d) if applicable, a statement that the firm or any affiliated company has been lead manager or co-lead manager over the previous 12 months of any publicly disclosed offer of securities of the relevant issuer or in any related derivatives;
- (e) if applicable, a statement that the firm or any affiliated company is party to any other agreement with the relevant issuer relating to the provision of investment banking services, provided that:
- (i) this would not entail the disclosure of any confidential commercial information; and
- (ii) the agreement has been in effect over the previous 12 months or has given rise during the same period to a payment or to the promise of payment; and
- (f) if applicable, a statement that the firm or any affiliated company is party to an agreement with the relevant issuer relating to the production of the research recommendation.
- (2) A firm must disclose, in general terms, in the research recommendation the effective organisational and administrative arrangements set up within the firm for the prevention and avoidance of conflicts of interest with respect to research recommendations, including information barriers.
- (3) In the case of an investment firm or a credit institution, if a legal or natural person working for the firm who is involved in the preparation of a research recommendation, receives or purchases shares of the relevant issuer prior to a public offering of those shares, the price at which the shares were acquired and the date of acquisition must also be disclosed in the research recommendation.
- (4) A firm, which is an investment firm or a credit institution, must publish the following information on a quarterly basis, and must disclose it in its research recommendations:
- (a) the proportion of all research recommendations published during the relevant quarter that are "buy", "hold", "sell" or equivalent terms; and
- (b) the proportion of relevant investments in each of these categories, issued by issuers to which the firm supplied material investment banking services during the previous 12 months.
- (5) If the requirements under (1) to (4) would be disproportionate in relation to the length of the research recommendation, a firm may, instead, make clear and prominent reference in the research recommendation to the place where such disclosure can be directly and easily accessed by the public (such as a hyperlink to the disclosure on an appropriate internet site of the firm, or, if relevant, to the firm's conflicts of interest policy).
- (6) In the case of non-written research recommendations, the requirements of (1) do not apply to the extent that they are disproportionate.
[Note: article 6 of the MAD Investment Recommendations Directive]
- 01/11/2007
COBS 12.4.11
See Notes
- 01/11/2007
COBS 12.4.12
See Notes
- 01/11/2007
COBS 12.4.13
See Notes
- 01/11/2007
COBS 12.4.14
See Notes
- 01/11/2007
Identity of disseminators of recommendations
COBS 12.4.15
See Notes
If a firm disseminates a research recommendation produced by a third party, the research recommendation must identify the firm clearly and prominently.
[Note: article 7 of the MAD Investment Recommendations Directive]
- 01/11/2007
General standard for dissemination of third party recommendations
COBS 12.4.16
See Notes
- (1) If a research recommendation produced by a third party is substantially altered before dissemination by a firm:
- (a) the disseminated material must clearly describe that alteration in detail; and
- (b) if the substantial alteration consists of a change of the direction of the recommendation (such as changing a "buy" recommendation into a "hold" or "sell" recommendation or vice versa), the requirements laid down in COBS 12.4.5 R to COBS 12.4.11 G on producers must be met by the firm, to the extent of the substantial alteration.
- (2) A firm which disseminates a substantially altered research recommendation must have a formal written policy so that the persons receiving the information may be directed to where they can have access to the identity of the producer of the research recommendation, the research recommendation itself and the disclosure of the producer's interests or conflicts of interest, provided that these elements are publicly available.
- (3) If a firm disseminates a summary of a research recommendation produced by a third party, it must:
- (a) ensure that the summary is fair, clear and not misleading;
- (b) identify the source research recommendation; and
- (c) identify where (to the extent that they are publicly available) the third party's disclosures relating to the source research recommendation can be directly and easily accessed by the public.
- (4) Paragraphs (1) and (2) do not apply to news reporting on research recommendations produced by a third party where the substance of the research recommendation is not altered.
[Note: article 8 of the MAD Investment Recommendations Directive]
- 01/11/2007
Additional obligations for investment firms and credit institutions disseminating third party recommendations
COBS 12.4.17
See Notes
If a firm, which is an investment firm or a credit institution, disseminates a research recommendation produced by a third party:
- (1) the name of the competent authority of the firm must be clearly and prominently indicated on the disseminated material;
- (2) if the producer of the research recommendation has not already disseminated it, the requirements in COBS 12.4.10 R must be met by the firm as if it had produced the research recommendation itself; and
- (3) if the firm has substantially altered the research recommendation, the requirements laid down in COBS 12.4.4 R to COBS 12.4.10 R must be met by the firm as if it had produced the research recommendation itself.
[Note: article 9 of the MAD Investment Recommendations Directive]
- 01/11/2007
COBS 13
Preparing product information
COBS 13.1
The obligation to prepare product information
- 01/11/2007
COBS 13.1.1
See Notes
A firm must prepare:
- (1) a key features document for each packaged product, cash-deposit ISA and cash-deposit CTF it produces; and
- (2) a key features illustration for each packaged product it produces;
- 01/11/2007
COBS 13.1.2
See Notes
A firm must prepare the Consolidated Life Directive information for each life policy it effects, in good time before that information has to be provided.
in good time before that information has to be provided.
[Note: article 36(1) of, and Annex III to, the Consolidated Life Directive]
- 01/11/2007
Exceptions
COBS 13.1.3
See Notes
A firm is not required to prepare:
- (1) a document, if another firm has agreed to prepare it; or
- (2) a key features document for:
- (a) a unit in a simplified prospectus scheme; or
- (b) a unit in an EEA simplified prospectus scheme; or
- (c) a unit in a key features scheme, if it prepares a simplified prospectus, or the information appears with due prominence in another document, instead; or
- (d) a stakeholder pension scheme, or personal pension scheme that is not a personal pension policy, if the information appears with due prominence in another document; or
- (3) a key features illustration, if it includes the information from the key features illustration in a key features document; or
- (4) the Consolidated Life Directive information, if the policy is a reinsurance contract or a pure protection contract.
- 01/11/2007
COBS 13.1.4
See Notes
- 01/11/2007
COBS 13.2
Product information: production standards, form and contents
- 01/11/2007
COBS 13.2.1
See Notes
When a firm prepares documents or information in accordance with this chapter, the firm should consider the rules on providing product information (COBS 14). Those rules require a firm to provide the product information in a durable medium or via a website that meets the website conditions (if the website is not a durable medium).
[Note: article 29(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 13.2.2
See Notes
A key features document and a key features illustration must also:
- (1) (if it is a key features document) be produced and presented to at least the same quality and standard as the sales or marketing material used to promote the relevant product;
- (2) (if it is a key features document) display the firm's brand at least as prominently as any other;
- (3) (if it is a key features document or a key features illustration which does not form an integral part of the key features document) include the 'keyfacts' logo in a prominent position at the top of the document; and
- (4) (if it is a key features document or a key features illustration which does not form an integral part of the key features document) include the following statement in a prominent position:
- 01/11/2007
COBS 13.2.3
See Notes
- 01/11/2007
COBS 13.2.4
See Notes
- 01/11/2007
COBS 13.3
Contents of a key features document
- 01/11/2007
General requirements
COBS 13.3.1
See Notes
A key features document must:
- (1) include enough information about the nature and complexity of the product, how it works, any limitations or minimum standards that apply and the material benefits and risks of buying or investing for a retail client to be able to make an informed decision about whether to proceed; and
- (2) explain:
- (a) the arrangements for handling complaints about the product;
- (b) that compensation might be available from the FSCS if the firm cannot meet its liabilities in respect of the product (if applicable);
- (c) that a right to cancel or withdraw exists, or does not exist, and, if it does exist, its duration and the conditions for exercising it, including information about the amount a client may have to pay if the right is exercised, the consequences of not exercising it and practical instructions for exercising it, indicating the address to which any notice must be sent;
- (d) (for a CTF) that stakeholder CTFs, cash-deposit CTFs and security-based CTFs are available and which type the firm is offering; and
- (e) (for a personal pension scheme) clearly and prominently, that stakeholder pension schemes are generally available and might meet the client's needs as well as the scheme on offer.
- 01/11/2007
Additional requirements for packaged products
COBS 13.3.2
See Notes
| A key features document for a packaged product must: | ||
| (1) | Include the title: 'key features of the [name of product]'; | |
| (2) | describe the product in the order of the following headings, and by giving the following information under those headings: | |
| Heading | Information to be given | |
| 'Its aims' | A brief description of the product's aims | |
| 'Your commitment' or 'Your investment' | What a retail client is committing to or investing in and any consequences of failing to maintain the commitment or investment | |
| 'Risks' | The material risks associated with the product, including a description of the factors that may have an adverse effect on performance or are material to the decision to invest | |
| 'Questions and Answers' | (in the form of questions and answers) the principle terms of the product, what it will do for a retail client and any other information necessary to enable a retail client to make an informed decision. | |
- 01/11/2007
COBS 13.4
Contents of a key features illustration
- 01/11/2007
COBS 13.4.1
See Notes
A key features illustration must include appropriate charges information and, if it is a packaged product which is not a financial instrument:
- (1) must include a standardised deterministic projection;
- (2) the projection and charges information must be consistent with each other;
- (3) it may also include alternative projections except that the most prominent projection must be a standardised deterministic projection.
- 01/11/2007
Exceptions
COBS 13.4.2
See Notes
A key features illustration must not include a generic projection unless:
- (1) there are reasonable grounds for believing that that projection will be sufficient to enable a retail client to make an informed decision about whether to invest; or
- (2) it is a direct offer financial promotion.
- 01/11/2007
COBS 13.4.3
See Notes
- 01/11/2007
COBS 13.4.4
See Notes
There is no requirement to include a projection in a key features illustration:
- (1) for a single premium life policy bought as a pure investment product, a product with benefits that do not depend on future investment returns or any other product if it is reasonable to believe that a retail client will not need one to be able to make an informed decision about whether to invest; or
- (2) if the product is:
- (a) a SIPP from which no income withdrawals are being taken; or
- (b) a life policy that will be held in a CTF or sold with basic advice (unless the policy is a stakeholder pension scheme).
- 01/11/2007
COBS 13.4.5
See Notes
- 01/11/2007
COBS 13.5
Preparing product information: other projections
- 01/11/2007
Projections for in-force products
COBS 13.5.1
See Notes
A firm that communicates a projection for an in-force packaged product which is not a financial instrument:
- (1) must include a standardised deterministic projection;
- (2) may also include an alternative projection except that the most prominent projection must be a standardised deterministic projection; and
must follow the projection rules in COBS 13 Annex 2.
- 01/11/2007
Projections: other situations
COBS 13.5.2
See Notes
A firm that communicates a projection for a packaged product which is not a financial instrument,
- (1) for which a key feature illustration is not required to be provided; and
- (2) which is not an in-force packaged product;
must ensure that such a projection is either a standardised deterministic projection or an alternative projection in accordance with COBS 13 Annex 2.
- 01/11/2007
Exceptions to the projection rules: projections for more than one product
COBS 13.5.3
See Notes
- 01/11/2007
COBS 13.5.4
See Notes
- 01/11/2007
COBS 13 Annex 1
The Consolidated Life Directive Information
- 01/11/2007
See Notes
| Information about the firm | |
| (1) | The firm's name and its legal form; |
| (2) | The name of the EEA State in which the head office and, where appropriate, agency or branch concluding the contract is situated; and |
| (3) | The address of the head office and, where appropriate, agency or branch concluding the contract. |
| Information about the commitment | |
| (4) | Definition of each benefit and each option; |
| (5) | Term of the contract; |
| (6) | Means of terminating the contract; |
| (7) | Means of payment of premiums and duration of payments; |
| (8) | Means of calculation and distribution of bonuses; |
| (9) | Indication of surrender and paid-up values and the extent to which they are guaranteed; |
| (10) | Information on the premiums for each benefit, both main benefits and supplementary benefits, where appropriate; |
| (11) | For unit-linked policies, definition of the units to which the benefits are linked; |
| (12) | Indication of the nature of the underlying assets for unit-linked policies; |
| (13) | Arrangements for application of the cooling-off period; |
| (14) | General information on the tax arrangements applicable to the type of policy; |
| (15) | The arrangements for handling complaints concerning contracts by policyholders, lives assured or beneficiaries under contracts including, were appropriate, the existence of a complaints body, without prejudice to the right to take legal proceedings; and |
| (16) | Law applicable to the contract where the parties do not have a free choice or, where the parties are free to choose the law applicable, the law the insurer proposes to choose. |
| [Note: article 36(1) of, and Annex III to, the Consolidated Life Directive] | |
- 01/11/2007
COBS 13 Annex 2
Projections
- 01/11/2007
This annex belongs to COBS 13.4.1 R (Contents of a key features illustration), COBS 13.5.1 R (Projections for in-force products) and COBS 13.5.2 R (Projections: other situations).
| R | ||
| Projections | ||
| 1 | Calculating standardised deterministic projections | |
| 1.1 | A standardised deterministic projection must: | |
| (1) | include a projection of benefits at the lower, intermediate and higher rates of return; | |
| (2) | be rounded down; and | |
| (3) | show no more than three significant figures. | |
| R | ||||
| 1.2 | Calculating projections: additional requirements for a pension scheme | |||
| (1) | A standardised deterministic projection within a key features illustration for a personal pension scheme or stakeholder pension scheme must include or be accompanied by information explaining the impact of inflation on those benefits. | |||
| (2) | Where a firm chooses to provide that information required in (1) in the form of one or more projections of benefits, it must include a projection in real terms, so long as it is either: | |||
| (a) | calculated using: | |||
| (i) | the appropriate intermediate rate of return; | |||
| (ii) | the intermediate rate of price inflation, in accordance with COBS 13 Annex 2 2.5R; and | |||
| (iii) | an annuity calculated in accordance with COBS 13 Annex 2 3.1R; or | |||
| (b) | consistent with the statutory money purchase illustration assumptions, with any material differences between the assumptions used and those otherwise required for accompanying standardised deterministic projections explained. | |||
| R | ||
| 1.3 | (1) | If a generic projection is prepared for a stakeholder pension scheme or personal pension scheme, sufficient separate projections, covering a range of different contractual periods and contributions, must be included for a retail client to be able to make an informed decision about whether to invest. |
| (2) | A projection prepared on that basis may omit benefits in nominal terms and only show a range of figures at the intermediate rate of return, of benefits in real terms. | |
| G | |
| 1.4 | A firm will provide sufficient separate projections if it prepares a table that shows projections in real terms for a variety of periods to maturity and a variety of contribution levels, taking into account the charges and other material terms that apply to the stakeholder pension scheme or personal pension scheme. Such a table could be laid out like a specimen benefits table (see COBS 13 Annex 2 1.8). |
| R | ||
| Calculating an alternative projection | ||
| 1.5 | An alternative projection must: | |
| (1) | (if the alternative projection is not a stochastic projection) not exceed the higher rate of return; | |
| (2) | (if the alternative projection is not a stochastic projection), use assumptions consistent with the assumptions which apply to standardised deterministic projections in this Annex, unless the reasons for any inconsistency are: | |
| (a) | reasonable; | |
| (b) | explained to a retail client, with enough information for the retail client to be able to understand the difference between the alternative projection and any standardised deterministic projection being provided; and | |
| (3) | (if the alternative projection is a stochastic projection) only be used if: | |
| (a) | there are reasonable grounds for believing that a retail client will be able to understand it; | |
| (b) | it is based on a reasonable number of simulations and assumptions which are reasonable and supported by objective data; and | |
| (c) | the alternative projection is accompanied by enough information for the retail client to be able to understand the difference between the alternative projection and any standardised deterministic projection being provided. | |
| G | |
| 1.6 | An alternative projection may be used either as part of a key features illustration or separately. However, it must not detract from any standardised deterministic projection required by COBS 13.4.1 R or COBS 13.5.1 R. |
| R | ||
| Exceptions | ||
| 1.7 | A projection: | |
| (1) | for a product that will mature in six months or less; or | |
| (2) | prepared in order to determine the maximum level of contributions permitted to be made to a personal pension scheme, | |
| may be prepared and presented on any reasonable basis but only if, in the case of (2), the assumptions used to calculate the projection and contributions are disclosed with the relevant projection. | ||
| R | |
| 1.8 | In the case of a stakeholder pension scheme, the specimen benefits table, contained within the FSA's "Stakeholder pension decision tree" factsheet and headed "Pension Table...How much should I save towards a pension?" which sets out initial monthly pension amounts, may be used instead of a standardised deterministic projection but only if it is accompanied by an explanation of the caveats and assumptions behind the table. |
| R | |
| 1.9 | The rules in this Annex do not apply to a projection which is consistent with the statutory money purchase illustration requirements. |
| R | |
| 1.10 | A personal pension scheme or stakeholder pension scheme taken out before 6 April 2014 may omit the standardised deterministic projection for existing business may omit the projection at the intermediate rate of return |
- 01/11/2007
| R | ||
| 2 | Assumptions to follow when calculating projections. | |
| Assumptions: projection date | ||
| 2.1 | A standardised deterministic projection must be calculated to the projection date described below: | |
| Product | Projection date | |
| (1) | A contract which is a whole life assurance the premiums under which are regular premiums | The anniversary of the commencement date: (a) which first falls after the seventy-fifth birthday of the life assured; or (b) (if there is more than one life assured) the anniversary of the commencement date which falls after the seventy fifth birthday of: (i) (if benefits are payable on the first death) the oldest life assured; or (ii) (in all other cases) the youngest life assured; subject to a minimum projection date of ten years. |
| (2) | A contract that is not in (1): (a) where the relevant marketing refers to a surrender value or an option to take benefits before they would otherwise be paid; or (b) that is open-ended, or linked to one or more lives, which is not a personal pension scheme or stakeholder pension scheme |
An appropriate date which highlights the features of the product |
| (3) | A contract that is not in (1) or (2) and has a specified maturity date | The maturity date specified in the contract |
| (4) | A contract that is not in (1) or (2) or (3) | The tenth anniversary of the commencement date |
| R | ||
| Assumptions: contributions | ||
| 2.2 | A standardised deterministic projection must: | |
| (1) | take account of all contributions due during the projection period; | |
| (2) | be calculated on the basis that contributions are accumulated, net of charges, at the appropriate rate of return compounded on an annual basis; | |
| (3) | (if it includes assumptions about contribution increases in line with an index) be based on an assumption that contribution increases are consistent with any assumptions regarding that index in this annex; and | |
| (4) | deduct from contributions any rider benefits or extra premium which may be charged for an increased underwriting risk. | |
| R | ||||
| Assumptions: rates of return | ||||
| 2.3 | A standardised deterministic projection must be calculated using the following rates of return: | |||
| Nominal rates | Lower rate | Inter-mediate rate | Higher rate | |
| tax-exempt business held in a wrapper or by a friendly society personal pension schemes, stakeholder pension schemes and investment-linked annuities |
5% | 7% | 9% | |
| all other products | 4% | 6% | 8% | |
| R | |
| Exception | |
| 2.4 | A standardised deterministic projection: |
| (1) | must be calculated using lower rates of return, if the rates described in this section overstate the investment potential of the product; |
| (2) | may be calculated using a lower rate of return if a retail client requests it. |
| R | |||
| Assumptions: inflation | |||
| 2.5 | If inflation is taken into account, the standardised deterministic projection must be calculated using the following rates: | ||
| Lower rate | Inter-mediate rate | Higher rate | |
| Price inflation | 0.50% | 2.50% | 4.50% |
| Earnings inflation | >2% | >4% | >6% |
| R | |||
| Assumptions: charges | |||
| 2.6 | The charges allowed for in a standardised deterministic projection: | ||
| (1) | must properly reflect: | ||
| (a) | all of the charges, expenses and deductions a client will, or may be expected to, pay; | ||
| (b) | the tax relief available to the firm in respect of so much of the firm's gross expenses as can properly be attributed to the contract; and | ||
| (c) | the fact that certain charges will be fully or partially off-set, but only to the extent that the firm can show that the off-set funds will be available when the relevant charges arise; and | ||
| (2) | must not include the firm's dealing costs incurred on the underlying portfolio. | ||
| G | ||
| 2.7 | (1) | Development and capital costs should normally be written off in the year in which they are incurred. However, some costs (for example, exceptional new business expenses) may be amortised and previous years' costs may then be brought into account. |
| (2) | If it is reasonable to assume that higher expenses will be incurred in the future, appropriate allowances should be made, and any inflation assumptions should be consistent with those prescribed in these rules. | |
| (3) | Expenses should be apportioned appropriately between products so that scales of expenses can be calculated and applied. | |
| (4) | Where appropriate, mortality and morbidity should be allowed for on a best estimate basis. The basis for annuities should allow for future improvements in mortality. | |
| (5) | A projection should not assume that charges will fall over time to a rate that is lower than the rate currently being charged on the relevant product (or, if there is no such charge, on a similar product). | |
| (6) | A projection of surrender value, cash-in value or transfer value should take into account any specific current surrender value basis and penalties which may be applied. | |
| R | ||
| Additional requirements: with-profits policies | ||
| 2.8 | (1) | A standardised deterministic projection for a with-profits policy must properly reflect the deductions from asset share which a firm expects to make in accordance with its deductions plan. |
| (2) | A standardised deterministic projection for a with-profits policy where bonus rates apply must assume that the bonus rates supported by the relevant premium and rate of return apply throughout the term of the contract. | |
| R | ||||
| Additional requirements: unsecured and alternatively secured pensions | ||||
| 2.9 | (1) | A standardised deterministic projection for an unsecured or alternatively secured pension must be based on the requirements contained in (2) to the extent that they impose additional or conflicting requirements to the balance of the rules in this section. | ||
| (2) | A standardised deterministic projection for an unsecured or alternatively secured pension must be based on an assumption that the current gilt-index yield will continue to apply throughout the relevant term and include: | |||
| (a) | the maximum initial income specified in the tables published by the Government Actuaries Department for an unsecured or alternatively secured pension (as the case may be); | |||
| (b) | the assumed level of income; | |||
| (c) | for a short-term annuity, where subsequent short-term annuities are assumed, a statement reflecting that fact; | |||
| (d) | (under the heading 'What the benefits might be'), the amount of income and the projected value of the fund at each fifth anniversary for the lower, intermediate and higher rates of return; | |||
| (e) | the projected open market values and the amounts of annuity at age 75 or the date at which it is reasonably assumed that an annuity will be purchased (which, for an alternatively secured pension, must be after ten years); and | |||
| (f) | the amount of annuity that could be secured using an immediate annuity rate available in the market. | |||
- 01/11/2007
| R | ||||
| 3 | How to calculate a projection for a future annuity | |||
| 3.1 | A projection for a future annuity must: | |||
| (1) | be calculated by rounding all factors to three decimal places before applying them to the relevant retirement fund; | |||
| (2) | be based on the mortality tables PMA92 and PFA92, using the medium cohort projection based on year of birth mortality rates; | |||
| (3) | (for a protected rights annuity) be calculated on a unisex basis so the policyholder has female mortality and the spouse has male mortality; | |||
| (4) | (for an annuity where two lives are concerned): | |||
| (a) | reflect the age difference between the two lives; or | |||
| (b) | be based on the assumption that the male life is three years older than the female (if the genders differ) or the two lives have the same age (if the genders are the same); | |||
| (5) | include an expenses allowance of 4%; | |||
| (6) | be based on the following rates of return as appropriate: | |||
| R | |||
| Lower rate | Intermediate rate | Higher rate | |
| Level or fixed rate of increase annuities | Y+1.5% | Y+3.5% | Y+5.5% |
| RPI or LPI linked annuities | Y-1% | Y | Y+1% |
| R | |||
| where: | |||
| 'Y' is 0.5* (ILG0 + ILG5)-0.5 rounded to the nearest 0.2%, with an exact 0.1% rounded down; and | |||
| 'ILG0' and 'ILG5' are the real yield on the FTSE Actuaries Government Securities Index-linked Real Yields over 5 years, assuming 0% and 5% inflation respectively, updated every 6 April to use the ILG0 and ILG5 which applied on or, if necessary, the business day immediately before, the preceding 15 February; and | |||
| (7) | (in the case of a future annuity with less than one year to maturity) be calculated using annuity rates that are no more favourable than the firm's relevant current immediate annuity rate or (if there is no such rate) the relevant immediate annuity rate available in the market; and | ||
| (8) | be assumed to be payable monthly in advance with a guaranteed period of 5 years, unless it is unreasonable to do so. | ||
| R | ||
| 3.2 | A projection for a future annuity: | |
| (1) | must be calculated using lower rates of return, if the rates described in this section overstate the investment potential of the product; | |
| (2) | may be calculated using a lower rate of return if a retail client requests it. | |
- 01/11/2007
| R | ||
| 4 | How to calculate a projection for an appropriate personal pension | |
| 4.1 | (If a client is considering whether to contract out), a projection for an appropriate personal pension must include or be accompanied by | |
| (1) a contracting out comparison providing a description of: | ||
| (a) the benefits that minimum contributions would secure if a retail client did not contract out of the State Second Pension; and | ||
| (b) the material differences between the anticipated position if a retail client remains contracted into the State Second pension and the anticipated position if that client contracts out; | ||
| which is calculated to the client's state retirement age using the lower and higher rates of return in 4.2R and aggregate contributions for the current and the next two tax years. | ||
| (2) an explanation that the figures in the comparison are intended to illustrate: | ||
| (a) the amount of pension that client might get compared with the benefit to be given up under the State Second Pension; and | ||
| (b) what might happen if the lower and higher rates of return were achieved each year. | ||
| R | ||
| 4.2 This table belongs to 4.1 R | ||
| Pre- and post-vesting real rates of return for contracting out comparisons. | ||
| Lower rate | Higher rate | |
| 1% | 3% | |
- 01/11/2007
| R | |||
| 5 | How to present a projection | ||
| 5.1 | A standardised deterministic projection must be accompanied by: | ||
| (1) | appropriate risk warnings, including warnings about volatility, the relationship between figures in real terms and those in nominal terms, and the degree to which any figures can be relied upon; and | ||
| (2) | a statement: | ||
| (a) | that projection rates are standardised or an explanation that projection rates that are lower than the standard rates have been used and why; | ||
| (b) | that charges may vary; | ||
| (c) | of the contributions that have been assumed; | ||
| (d) | that increases in contributions have been assumed (if that is the case), together with sufficient information for a retail client to be able to understand the nature and magnitude of the assumed increases; and | ||
| (e) | of the sum of any actual premiums charged for any rider benefits or increased underwriting risks (where these have been charged). | ||
| R | |
| Additional requirements: pension schemes and products linked to other products | |
| 5.2 | A standardised deterministic projection for a product where the benefits illustrated depend on a link to a separate product must include an appropriate description of the material factors that might influence the returns available overall and any restrictions assumed in providing an illustration of benefits in relation to that separate product. |
- 01/11/2007
COBS 13 Annex 3
Charges
- 01/11/2007
This annex belongs to COBS 13.4.1 R (Contents of a key features illustration)
| R | |||
| Charges | |||
| 1 | Appropriate charges information | ||
| 1.1 | Appropriate charges information comprises: | ||
| (1) | a description of the nature and amount of the charges a client will or may be expected to bear; | ||
| (2) | an 'effect of charges' table; and | ||
| (3) | 'reduction in yield' information. | ||
| 1.2 | Where a firm does not include a projection within its key features illustration the charges information can be on a generic basis. | ||
| Exceptions | |||
| 1.3 | An effect of charges table and reduction in yield information are not required for: | ||
| (1) | a life policy without a surrender value, but an appropriate warning must be included to make it clear that the policy has no cash-in value at any time; | ||
| (2) | a SIPP; | ||
| (3) | a stakeholder pension scheme, if the following is included instead: "There is an annual charge of y% of the value of the funds you accumulate. If your fund is valued at £500 throughout the year, this means we deduct [£500 x y/100] that year. If your fund is valued at £7500 throughout the year, we will deduct [£7500 x y/100] that year." |
||
| (4) | a stakeholder product that is not a stakeholder pension scheme, or a product that will be held in a CTF where the relevant product and the CTF levy their charges annually, if the following is included instead: "There is an annual charge of y% of the value of the funds you accumulate. If your fund is valued at £250 throughout the year, this means we deduct [£250 x y/100] that year. If your fund is valued at £500 throughout the year, this means we deduct [£500 x y/100] that year. [After ten years these deductions reduce to [£250 x r/100] and [£500 x r/100] respectively.]" where (in the case of (3) and (4)) 'y' is the annual charge and 'r' is the reduced annual charge (if any). |
||
| 1.4 | Reduction in yield information is not required for a without profits life policy with guaranteed benefits (except on surrender or variation), a life policy with a term not exceeding five years or a life policy that will be held in a CTF. | ||
- 01/11/2007
| R | ||
| 2 | Effect of charges table | |
| 2.1 | Each 'effect of charges' table must be accompanied by, or refer to: | |
| (1) | a statement that all relevant guarantees have been taken into account (if there are any); | |
| (2) | a warning that one effect of the charges referred to is that a retail client could get back less than they invest (if that is the case); and | |
| (3) | the rate of return used to calculate the figures in the table. | |
- 01/11/2007
(1) for a life policy, personal pension scheme or stakeholder pension scheme must be in the following form:
| R | |||||
| Note 1A | Note 2 | Note 3 | Note 4 | Note 5 | Note 6 |
| At end of year | Total paid in to date | With-drawals | Total actual deductions to date | Effect of deductions to date | What you might get back |
| £ | £ | £ | £ | £ | |
| 1 | |||||
| ... | |||||
| 5 | |||||
| 10 | |||||
| ... | |||||
| R | ||||
| Note 1B | Note 2 | Note 3 | Note 5 | Note 6 |
| At end of year | Investment to date | Income | Effect of deductions to date | What you might get back |
| £ | £ | £ | £ | |
| 1 | ||||
| 5 | ||||
| 10 | ||||
| ... | ||||
| R | ||
| 1A | (a) | This column must include the first five years, every subsequent fifth year and the final year of the projection period. |
| (b) | Figures may be shown for every subsequent tenth year rather than subsequent fifth year where the projection period exceeds 25 years, or for whole of life policies. | |
| (c) | For whole of life policies, should the projected fund reach zero before the end of the projection period this must be highlighted. | |
| (d) | For an alternatively secured pension figures must be included for each year for a term of ten years. | |
| (e) | If there is discontinuity in the trend of surrender values, the appropriate intervening years must also be included. | |
| (f) | Figures for a longer term may be shown. | |
| 1B | (a) | This column must include the first year, the fifth year and every subsequent fifth year of the projection period. |
| (b) | For an alternatively secured pension figures must be included for each year for a term of ten years. | |
| (c) | Figures for a longer term may be shown. | |
| 2 | This column must show the cumulative contributions paid to the end of each relevant year. | |
| 3 | This column must show the cumulative withdrawals taken or income paid to the end of each relevant year (if any). The column may be omitted if withdrawals or income are not anticipated or allowed. | |
| 4 | This column is optional. If it is retained, it must show the total actual deductions to the end of each relevant year calculated using the following method: | |
| (a) | apply the intermediate rate of return for the relevant product to the figure in the 'effect of deductions to date' column for the previous year; | |
| (b) | subtract this figure from the figure in the 'effect of deductions to date' column for the year being shown; and | |
| (c) | add the resulting figure to the figure in the 'total actual deductions to date' column for the previous year (if any). | |
| 5 | This column may be deleted if the product is a without profits life policy with benefits that are guaranteed except on surrender or variation, a life policy with a term not exceeding five years, or a life policy that will be held in a CTF. | |
| If this column is not deleted, the 'effect of deductions to date' figure must be calculated by taking the accumulated value of the fund without reference to charges and then subtracting from this figure the figure in the 'what you might get back column' for the same year. | ||
| 6 | This column must show standardised deterministic projection of the surrender value, cash-in value or transfer value, calculated in accordance with the rules in COBS 13 Annex 2 (Projections) at the appropriate intermediate rate of return to the end of each relevant year. | |
| R | |
| Exception | |
| 2.3 | An effect of charges table may be amended, but only if and to the extent that is necessary to properly reflect the nature and effect of the charges inherent in a particular product. |
| G | |
| 2.4 | The effect of 2.3R is that, for example, the column labels and explanatory text may be adjusted to reflect the nature of the contract. For instance: |
| The column titled 'What you might get back' might be replaced with 'What the transfer value might be' for personal pensions, or 'Open market value' for income withdrawals or short-term annuities. | |
| The withdrawals column may be called 'Total income taken' for income withdrawals or short-term annuities. | |
| The table may be titled 'What effect will the deductions have?' for income withdrawals or short-term annuities. | |
- 06/08/2008
| R | |||
| 3 | Reduction in yield | ||
| 3.1 | Reduction in yield ('A') is 'B' less 'C' where: | ||
| (1) | 'B' is the intermediate rate of return for the relevant product; and | ||
| (2) | 'C' is determined by: | ||
| (a) | carrying out a standardised deterministic projection to the projection date, using 'B'; and then | ||
| (b) | calculating the annual rate of return ('C') (rounded to the nearest tenth of 1 %) required to achieve the same projection value if charges are left out of account. | ||
| 3.2 | A firm must present reduction in yield as 'A%', as part of a statement which explains that 'charges and expenses have the effect of reducing your anticipated returns from 'B%' to 'C%', or in some other appropriate way. | ||
| 3.3 | If contributions will be invested in more than one fund in a single designated investment or made by an initial lump sum payment that is followed by regular contributions, the reduction in yield must be: | ||
| (1) | calculated separately for each fund or for the single contribution and the regular contributions (as the case may be); and | ||
| (2) | presented: | ||
| (a) | on a fund by fund, or single contribution and regular contribution, basis, together with a statement which explains the nature and effect of a reduction in yield, the reason for the inclusion of more than one reduction in yield figure and the reason for the differences between them; or | ||
| (b) | (if the reduction in yield results are so similar that one figure could reasonably be regarded as representative of the others), as a single figure together with a statement which explains the nature and effect of a reduction in yield, and that the reduction in yield figure given is representative of the reduction in yield figures for each of the funds or for the single and regular contributions (as the case may be); or | ||
| (c) | through a single figure combining the separate figures for each fund or contribution in a proportionate manner, with an appropriate description. | ||
| 3.4 | Where a firm is calculating reduction in yield information, it must: | ||
| (1) | disregard charges related to mortality and morbidity risks; or | ||
| (2) | (where the requirement in (1) produces figures that are misleading) include a statement with the reduction in yield information that it has been calculated taking into account charges related to mortality and morbidity risk. | ||
- 01/11/2007
COBS 14
Providing product information to clients
COBS 14.1
Interpretation
- 01/11/2007
COBS 14.1.1
See Notes
In this chapter:
- (1) 'retail client' includes the trustee or operator of a stakeholder pension scheme or personal pension scheme and the trustee of a money-purchase occupational pension scheme; and
- (2) 'sell' includes 'sell, personally recommend or arrange the sale of' in relation to a designated investment and equivalent activities in relation to a cash-deposit ISA and cash-deposit CTF.
- 01/11/2007
COBS 14.2
Providing product information to clients
- 01/11/2007
The provision rules
COBS 14.2.1
See Notes
A firm that sells:
- (1) a packaged product to a retail client, must provide a key features document and a key features illustration to that client (unless the packaged product is a unit in a simplified prospectus scheme or an EEA simplified prospectus scheme);
- (2) a life policy that is not a reinsurance contract to a client, must provide the Consolidated Life Directive information to that client;
- (3) the variation of a life policy or personal pension scheme to a retail client, must provide that client with sufficient information about the variation for the client to be able to understand the consequences of the variation (unless the policy or scheme is a SIPP);
- (4) a cash-deposit ISA or cash-deposit CTF to a retail client, must provide a key features document to that client;
- (5) a unit in a simplified prospectus scheme to a client, must offer the scheme's current simplified prospectus to that client. In addition, if the client is a retail client present in the EEA, the firm must provide the simplified prospectus to the client together with:
- (a) enough information for the client to be able to make an informed decision about whether to hold the units in a wrapper (if the units will, or may, be held in that way); and
- (b) information about the three types of CTF that are generally available (stakeholder CTFs, cash-deposit CTFs and security-based CTFs), and the type of CTF the firm is offering (if the units will, or may, be held in a CTF);
- (6) a unit in an EEA simplified prospectus scheme to a client, must offer an up-to-date copy of the scheme's EEA simplified prospectus to that client.
[Note: in respect of (5) and (6) articles 1, 33(1) and 44 of the UCITS Directive]
- 01/11/2007
COBS 14.2.2
See Notes
- 01/11/2007
COBS 14.2.3
See Notes
- (1) A firm that personally recommends that a retail client holds a particular asset in a SIPP must provide that client with sufficient information for the client to be able to make an informed decision about whether to buy or invest.
- (2) This rule does not apply if the asset is described in COBS 14.2.1 R.
- 01/11/2007
Firm not to cause confusion about the identity of the producer of a product
COBS 14.2.4
See Notes
- 01/11/2007
Exception to the provision rules: key features documents and simplified prospectuses
COBS 14.2.5
See Notes
A firm is not required to provide:
- (1) a document, if the firm produces the product and the rules in this section require another firm to provide the document;
- (2) a key features document or key features illustration, if another person is required to provide the distance marketing information by the rules of another EEA State;
- (3) the Consolidated Life Directive information, if another person is required to provide that information by the rules of another EEA State;
- (4) a simplified prospectus if:
- (a) another person is required to offer the simplified prospectus to the client by the rules of another EEA State; or
- (b)
- (i) the client is buying or investing in response to a direct offer financial promotion without receiving a personal recommendation to buy or invest; and
- (ii) the firm offers an up-to-date copy of the simplified prospectus to the client and provides materially the same information to the client in some other way.
- 01/11/2007
Exception: key features illustrations
COBS 14.2.6
See Notes
- 01/11/2007
Exception to the provision rules: key features documents and key features illustrations
COBS 14.2.7
See Notes
A firm is not required to provide a key features document or a key features illustration for:
- (1) a key features scheme if it provides a simplified prospectus instead;
- (2) a life policy that is not a reinsurance contract if:
- (a) the firm is operating from an establishment in another EEA State and the sale is by distance contract; or
- (b) the client is habitually resident outside the United Kingdom and the sale is not by distance contract.
- (3) a traded life policy.
[Note: in respect of (2), articles 4(1) and 16 of the Distance Marketing Directive and article 36 of the Consolidated Life Directive]
- 01/11/2007
Exception to the provision rules: key features documents and key features illustrations
COBS 14.2.8
See Notes
A firm is not required to provide a key features document or a key features illustration, if:
- (1) the client is buying or investing in response to a direct offer financial promotion without receiving a personal recommendation to buy or invest; and
- (2) the firm provides materially the same information in some other way.
- 01/11/2007
Exception to the provision rules: key features documents, key features illustrations and simplified prospectuses
COBS 14.2.9
See Notes
A firm is not required to provide a key features document, a key features illustration or a simplified prospectus for a key features scheme or simplified prospectus scheme if:
- (1) the client is habitually resident outside the EEA and not present in the EEA when the relevant application is signed; or
- (2) the purchase is by a discretionary investment manager on behalf of a retail client; or
- (3) the sale is arranged or personally recommended by an investment manager and the client has agreed that a key features document or simplified prospectus is not required; or
- (4) a retail client is purchasing a holding in a scheme in which the client already has a holding, or the client is switching from one class of shares or units to another in the same scheme, and the relevant document has already been provided to that client.
[Note: articles 1, 33(1), and 44 of the UCITS directive]
- 01/11/2007
COBS 14.2.10
See Notes
- 01/11/2007
Exception to the provision rules: aggregated scheme documents
COBS 14.2.11
See Notes
A firm may provide a single document, which describes more than one key features scheme, simplified prospectus scheme or EEA simplified prospectus scheme, or any combination of those schemes, if:
- (1) the schemes are offered through a funds supermarket service;
- (2) the document clearly describes the difference between the relevant schemes; and
- (3) (in the case of a simplified prospectus scheme or an EEA simplified prospectus scheme) the firm also offers copies of the relevant prospectuses to the client.
[Note: article 33(1) of the UCITS directive]
- 01/11/2007
Exception: successive operations
COBS 14.2.12
See Notes
- 01/11/2007
COBS 14.2.13
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 rules in this section 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 to be the first in a new series of operations).
- 01/11/2007
The timing rules
COBS 14.2.14
See Notes
When the rules in this section require a firm to:
- (1) offer a simplified prospectus or an EEA simplified prospectus to a client, that prospectus must be offered free of charge before the conclusion of the contract; or
- (2) provide a key features document, a simplified prospectus, an EEA simplified prospectus or any other document or information to a client, the document or information must be provided free of charge and in good time before the firm carries on the relevant business.
[Note: article 33(1) of the UCITS directive]
- 01/11/2007
Exception to the timing rules: child trust funds
COBS 14.2.15
See Notes
- 01/11/2007
Exception to the timing rules: distance contracts and voice telephony communications
COBS 14.2.16
See Notes
- 01/11/2007
COBS 14.2.17
See Notes
Where the rules in this section require a document or information to be provided, in the case of a voice telephony communication, a firm must:
- (1) if the client gives explicit consent to receiving only limited information, provide the abbreviated distance marketing disclosure information (COBS 5 Annex 2 R) orally to the client;
- (2) if the client does not give explicit consent to only receiving limited information, and the parties wish to proceed by voice telephony communication, provide the distance marketing information (COBS 5 Annex 1 R) orally to the client;
- (3) in the case of (1) or (2), send the documents or information to the client in a durable medium immediately after the contract is concluded.
- 06/08/2008
COBS 14.3
Information about designated investments
- 01/11/2007
Application
COBS 14.3.1
See Notes
This section applies to a firm in relation to:
- (1) MiFID or equivalent third country business; and
- (2) the following regulated activities when carried on for a retail client:
- (a) making a personal recommendation about a designated investment; or
- (b) managing investments that are designated investments; or
- (c) arranging, (bringing about) or executing a deal in a warrant or derivative; or
- (d) engaging in stock lending activity.
- 01/11/2007
Providing a description of the nature and risks of designated investments
COBS 14.3.2
See Notes
A firm must provide a client with a general description of the nature and risks of designated investments, taking into account, in particular, the client's categorisation as a retail client or a professional client. That description must:
- (1) explain the nature of the specific type of designated investment concerned, as well as the risks particular to that specific type of designated investment, in sufficient detail to enable the client to take investment decisions on an informed basis; and
- (2) include, where relevant to the specific type of designated investment concerned and the status and level of knowledge of the client, the following elements:
- (a) the risks associated with that type of designated investment including an explanation of leverage and its effects and the risk of losing the entire investment;
- (b) the volatility of the price of designated investments and any limitations on the available market for such investments;
- (c) the fact that an investor might assume, as a result of transactions in such designated investments, financial commitments and other additional obligations, including contingent liabilities, additional to the cost of acquiring the designated investments; and
- (d) any margin requirements or similar obligations, applicable to designated investments of that type.
[Note: article 31(1) and (2) of the MiFID implementing Directive]
- 01/11/2007
COBS 14.3.3
See Notes
If a firm provides a retail client with information about a designated investment that is the subject of a current offer to the public and a prospectus has been published in connection with that offer in accordance with the Prospectus Directive, that firm must inform the retail client where that prospectus is made available to the public.
[Note: article 31(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 14.3.4
See Notes
Where the risks associated with a designated investment composed of two or more different designated investments or services are likely to be greater than the risks associated with any of the components, a firm must provide an adequate description of the components of that designated investment and the way in which its interaction increases the risks.
[Note: article 31(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 14.3.5
See Notes
In the case of a designated investment that incorporates a guarantee by a third party, the information about the guarantee must include sufficient detail about the guarantor and the guarantee to enable the retail client to make a fair assessment of the guarantee.
[Note: article 31(5) of the MiFID implementing Directive]
- 01/11/2007
Satisfying the provision rules
COBS 14.3.6
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 provision rules (COBS 14.3.2 R to COBS 14.3.5 R) in relation to each transaction.
- (2) But a firm should ensure that the client has received all relevant information in relation to a transaction, such as details of product charges that differ from those already disclosed.
[Note: in respect of (1), recital 50 to to the MiFID implementing Directive]
- 01/11/2007
COBS 14.3.7
See Notes
- 01/11/2007
Product information: form
COBS 14.3.8
See Notes
The documents and information provided in accordance with the rules in this section must be in a durable medium or available on a website (where that does not constitute a durable medium) that meets the website conditions.
[Note: article 29(4) of the MiFID implementing Directive]
- 01/11/2007
The timing rules
COBS 14.3.9
See Notes
- (1) The information to be provided in accordance with the rules in this section must be provided in good time before a firm carries on designated investment business or ancillary services with or for a retail client.
- (2) A firm may provide that information immediately after it begins to carry on that business 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 complying with that rule; 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 as if the client was a consumer.
[Note: article 29(2) and (5) of the MiFID implementing Directive]
- 01/11/2007
Keeping the client up-to-date
COBS 14.3.10
See Notes
A firm must notify a client in good time about any material change to the information provided under the rules in this section which is relevant to a service that the firm is providing to that client. That notification must be given in a durable medium if the information to which it relates is given in a durable medium.
[Note: article 29(6) of the MiFID implementing Directive]
- 01/11/2007
Information about UCITS schemes
COBS 14.3.11
See Notes
If a firm provides a client with a simplified prospectus or an EEA simplified prospectus that meets the requirements of article 28 of the UCITS Directive, it will have provided appropriate information for the purpose of the requirement to disclose information on:
- (1) designated investments and investment strategies (COBS 2.2.1R (1)(b)); and
- (2) costs and associated charges (COBS 2.2.1R (1)(d) and COBS 6.1.9 R;
in relation to the costs and associated charges in respect of the UCITS scheme itself, including the exit and entry commissions.
[Note: article 34 of the MiFID implementing Directive]
- 01/11/2007
COBS 14.3.12
See Notes
A simplified prospectus provides sufficient information in relation to the costs and associated charges in respect of the UCITS scheme itself. However, a firm distributing units in a UCITS scheme should also inform a client about all of the other costs and associated charges related to the provision of its services in relation to units in the UCITS scheme.
[Note: recital 55 to the MiFID implementing Directive]
- 01/11/2007
COBS 15
Cancellation
COBS 15.1
Application
- 01/11/2007
COBS 15.1.1
See Notes
This chapter is relevant to a firm that enters into a contract cancellable under this chapter. In summary, this means it is relevant to:
- (1) most providers of retail financial products that are based on deposits or designated investments; and
- (2) firms that enter into distance contracts with consumers that relate to accepting deposits or designated investment business.
- 01/11/2007
COBS 15.2
The right to cancel
- 01/11/2007
Cancellable contracts
COBS 15.2.1
See Notes
A consumer has a right to cancel any of the following contracts with a firm:
| Cancellable contract | Cancellation period | Supplementary provisions |
| Life and pensions: | ||
| • a life policy (including a pension annuity, a pension policy or within a wrapper) • a contract to join a personal pension scheme or a stakeholder pension scheme • a pension contract • a contract for a pension transfer • a contract to vary an existing personal pension scheme or stakeholder pension scheme by exercising, for the first time, an option to make income withdrawals, |
30 calendar days | For a life policy effected when opening or transferring a wrapper, the 30 calendar day right to cancel applies to the entire arrangement For a contract to buy a unit in a regulated collective investment scheme within a pension wrapper, the cancellation right for 'non-life/pensions (advised but not at a distance)' below may apply Exemptions may apply (see COBS 15 Annex 1) |
| Cash deposit ISAs: | ||
| • a contract for a cash deposit ISA | 14 calendar days | Exemptions may apply (see COBS 15 Annex 1) |
| Non-life/pensions (advised but not at a distance): a non-distance contract ... | ||
| • to buy a unit in a regulated collective investment scheme (including within a wrapper or pension wrapper) • to open or transfer a child trust fund (CTF) • to open or transfer an ISA or PEP • for an Enterprise Investment Scheme |
14 calendar days | These rights arise only following a personal recommendation of the contract (by the firm or any other person) For a unit bought when opening or transferring a wrapper or pension wrapper, the 14 calendar day right to cancel applies to the entire arrangement Exemptions may apply (see COBS 15 Annex 1) |
| Non-life/pensions (at a distance): a distance contract, relating to ... | ||
| • accepting deposits • designated investment business |
14 calendar days | Exemptions may apply (see COBS 15 Annex 1) |
[Note: article35 of the Consolidated Life Directive, article 6(1) of the Distance Marketing Directive]
- 01/11/2007
COBS 15.2.2
See Notes
- (1) If the same transaction attracts more than one right to cancel, the firm should apply the longest cancellation period applicable.
- (2) A firm may provide longer or additional cancellation rights voluntarily, but if it does these should be on terms at least as favourable to the consumer as those in this chapter, unless the differences are clearly explained.
- (3) If the right to cancel applies to a wrapper or pension wrapper and underlying investments, the firm may give the consumer the option of cancelling individual components separately if it wishes.
- 01/11/2007
Start of cancellation period
COBS 15.2.3
See Notes
The cancellation period begins:
- (1) either from the day of the conclusion of the contract, except in respect of contracts relating to life policies where the time limit will begin from the time when the consumer is informed that the contract has been concluded; or
- (2) from the day on which the consumer receives the contractual terms and conditions and any other pre-contractual information required under this sourcebook, if that is later than the date referred to above.
[Note: article 35 of the Consolidated Life Directive, article 6(1) of the Distance Marketing Directive]
- 01/11/2007
COBS 15.2.4
See Notes
- 01/11/2007
Disclosing a right to cancel or withdraw
COBS 15.2.5
See Notes
- (1) The firm must disclose to the consumer:
- (a) in good time before or, if that is not possible, immediately after the consumer is bound by a contract that attracts a right to cancel or withdraw; and
- (b) in a durable medium;
- the existence of the right to cancel or withdraw, its duration and the conditions for exercising it including information on the amount which the consumer may be required to pay, the consequences of not exercising it and practical instructions for exercising it indicating the address to which the notification of cancellation or withdrawal should be sent.
- (2) This rule applies only where a consumer would not otherwise receive similar information under a rule in this sourcebook from the firm or another authorised person (such as under the distance marketing disclosure rules (COBS 5.1.1 R to 5.1.4 R) or COBS 14 (Providing product information)).
- 01/11/2007
COBS 15.3
Exercising a right to cancel
- 01/11/2007
Notice of exercise
COBS 15.3.1
See Notes
If a consumer exercises his right to cancel he must, before the expiry of the relevant deadline, notify this following the practical instructions given to him. The deadline shall be deemed to have been observed if the notification, if in a durable medium available and accessible to the recipient, is dispatched before the deadline expires.
[Note: article 6 (6) of the Distance Marketing Directive]
- 01/11/2007
COBS 15.3.2
See Notes
A consumer need not give any reason for exercising his right to cancel.
[Note: article 6(1) of the Distance Marketing Directive]
- 01/11/2007
COBS 15.3.3
See Notes
- 01/11/2007
Record keeping
COBS 15.3.4
See Notes
The firm must make adequate records concerning the exercise of a right to cancel or withdraw and retain them:
- (1) indefinitely in relation to a pension transfer, pension opt-out or FSAVC;
- (2) for at least five years in relation to a life policy, pension contract, personal pension scheme or stakeholder pension scheme; and
- (3) for at least three years in any other case.
- 01/11/2007
COBS 15.4
Effects of cancellation
- 01/11/2007
Termination of contract
COBS 15.4.1
See Notes
- 01/11/2007
Payment for the service provided before cancellation
COBS 15.4.2
See Notes
- (1) This rule applies in relation to a distance contract that is not a life policy, personal pension scheme, cash deposit ISA or CTF.
- (2) When the consumer exercises his right to cancel he may be required to pay, without any undue delay, for the service actually provided by the firm in accordance with the contract. The performance of the contract may only begin after the consumer has given his approval. The amount payable must not:
- (a) exceed an amount which is in proportion to the extent of the service already provided in comparison with the full coverage of the contract;
- (b) in any case be such that it could be construed as a penalty.
- (3) The firm may not require the consumer to pay any amount on the basis of this rule unless it can prove that the consumer was duly informed about the amount payable, in conformity with the distance marketing disclosure rules. However, in no case may the firm require such payment if it has commenced the performance of the contract before the expiry of the cancellation period without the consumer's prior request.
[Note: article 7(1), (2) and (3) of the Distance Marketing Directive]
- 01/11/2007
Shortfall
COBS 15.4.3
See Notes
- (1) The firm may require the consumer to pay for any loss under a contract caused by market movements that the firm would reasonably incur in cancelling it. The period for calculating the loss shall end on the day on which the firm receives the notification of cancellation.
- (2) This rule:
- (a) does not apply for a distance contract or for a contract established on a regular or recurring premium or payment basis; and
- (b) only applies if the firm has complied with its obligations to disclose information concerning the right to cancel.
- 01/11/2007
Obligations on cancellation
COBS 15.4.4
See Notes
The firm must, without any undue delay and no later than within 30 calendar days, return to the consumer any sums it has received from him in accordance with the distance contract, except for any amount that the consumer may be required to pay under this section. This period shall begin from the day on which the firm receives the notification of cancellation.
[Note: article 7(4) of the Distance Marketing Directive]
- 01/11/2007
COBS 15.4.5
See Notes
The firm is entitled to receive from the consumer any sums and/or property he has received from the firm without any undue delay and no later than within 30 calendar days. This period shall begin from the day on which the consumer dispatches the notification of cancellation.
[Note: article 7(5) of the Distance Marketing Directive]
- 01/11/2007
COBS 15.4.6
See Notes
- 01/11/2007
COBS 15.5
Special situations
- 01/11/2007
Contracts with trustees and operators of pension schemes
COBS 15.5.1
See Notes
In this chapter:
- (1) references to a consumer include the trustees of an occupational pension scheme and the trustees or operator of a personal pension scheme or stakeholder pension scheme; and
- (2) any contract with such persons is to be treated as a non-distance contract.
- 01/11/2007
Other legislation including for child trust funds
COBS 15.5.2
See Notes
- 01/11/2007
COBS 15.5.3
See Notes
For example:
- (1) the Child Trust Fund Regulations contain provisions relevant to cancellation rights; in particular they provide that any uninvested sums held in connection with a CTF should be held in a designated bank account; and the effect of conditions 4(a) and (b) in regulation 5 of the Child Trust Fund Regulations (applicable to non-HMRC allocated CTF) is that a CTF opened by way of distance contract has a cancellable management agreement in all cases and the CTF cannot be opened until the cancellation period has expired, therefore the price fluctuation exemption is not engaged;
- (2) where legislation does not permit sums within a personal pension scheme or CTF to be returned to a consumer, the requirement to do so on cancellation is modified to permit payment to another provider on behalf of the consumer; the firm should notify him, where relevant, as soon as possible that it holds money awaiting re-investment instructions; if that money is held in a non-interest bearing account this should be drawn to his attention.
- 01/11/2007
Automatic cancellation of an attached distance contract
COBS 15.5.4
See Notes
- 01/11/2007
Appointed representatives
COBS 15.5.5
See Notes
- 01/11/2007
Maxi-ISAs
COBS 15.5.6
See Notes
- 01/11/2007
COBS 15 Annex 1
Exemptions from the right to cancel
- 01/11/2007
| Exemptions for life policies and pension contracts (non-distance) | ||||
| 1.1 | R | There is no right to cancel a non-distance contract that is a life policy or a pension contract: | ||
| (1) | that is a pension fund management policy; or | |||
| (2) | that relates to or is associated with securing benefits under a defined benefits pension scheme; or | |||
| (3) | for a term of six months or less, unless it is a single premium contract where the designated retirement date is within six months of the date of the policy; or | |||
| (4) | that is effected by the trustees of an occupational pension scheme or the employer, trustees or operator of a stakeholder pension scheme and that represents a:
(a) pension buy-out contract; or (b) purchase of a without-profits deferred pension annuity; or (c) defined benefits pension scheme or a single premium payment to any occupational pension scheme with a pooled fund (that is, underlying investments are not earmarked for individual scheme members); or (d) purchase made to insure and secure members' pension benefits under a money-purchase occupational scheme or stakeholder pension scheme (unless it is the master, first or only policy); or
|
|||
| (5) | if the consumer, at the time he signs the application, is habitually resident: | |||
| 1.2 | G | There is no right to cancel a non-distance contract for a traded life policy. This is because the 30-day right to cancel a life policy (in COBS 15.2.1 R) applies at the point of conclusion of the life policy not on its assignment. However, there may be a 14-day right to cancel a distance contract for a traded life policy unless an exemption applies, since that distance contract relates to designated investment business. | ||
| Exemption for SIPPs | ||||
| 1.3 | R | There is no right to cancel a contract to join a SIPP whose performance has been fully completed by both parties at the consumer's express request before the consumer exercises his right to cancel. | ||
| 1.4 | G | If a consumer requests that a firm complete a transaction to join a SIPP before the expiry of the cancellation period, the firm should, in having regard to the information needs of the consumer, make him aware that he will lose his right to cancel and satisfy itself on reasonable grounds that the customer understands the cost and other implications. | ||
| Exemptions for certain pension arrangements (the 'cancellation substitute') | ||||
| 1.5 | R | There is no right to cancel: | ||
| (1) | a contract for or funded (wholly or in part) from a pension transfer; or | |||
| (2) | a pension annuity due to commence within a year and a day of the contract or a variation of one with similar commencement; or | |||
| (3) | the exercise of an option to make income withdrawals; | |||
| to the extent that the right to cancel is replaced with a pre-contract right to withdraw the consumer's offer of at least 14 calendar days. The combined period of the right to withdraw and any residual right to cancel must be at least 30 calendar days. | ||||
| Exemption for pension compensation | ||||
| 1.6 | R | There is no right to cancel a pension annuity, a pension policy, a pension contract, or a contract to join a personal pension scheme or stakeholder pension scheme, which in each case is funded (wholly or in part) from payments derived from compensation or redress following a review undertaken in relation to a complaint. | ||
| Exemption for annuities after death of the life assured | ||||
| 1.7 | R | A firm need not accept notification of cancellation of a pension annuity contract if the life (or any of the lives) assured under it has died before notice is given. | ||
| Exemptions for units (non-distance) | ||||
| 1.8 | R | There is no right to cancel a non-distance contract to buy a unit in a regulated collective investment scheme: | ||
| (1) | if the unit is not purchased from the scheme's operator, from the operator's associate acting as provider of a wrapper; or | |||
| (2) | if the consumer is not a retail client; or | |||
| (3) | if the contract represents an exchange of units between sub-funds of the same umbrella; or | |||
| (4) | if the contract relates to a change between units of one class and units of another class in the same scheme; or | |||
| (5) | if the contract relates to a recognised scheme and is with an operator who is not an authorised person or carrying on business in the UK; or | |||
| (6) | if the consumer is not habitually resident in the UK at the date of the offer of the contract; or | |||
| (7) | if the firm has reasonable grounds for assuming that no personal recommendation of the contract was provided by anyone carrying on designated investment business in the UK; or | |||
| (8) | for the second and subsequent purchases of units under recurring single payment unit savings plans, provided that:
(a) the intention or option to make a series of single payments is disclosed at the outset (for example in pre-contract disclosure documents); or (b) the intention is evidenced (for example, by the establishment of a direct debit mandate).
|
|||
| Exemptions for ISAs, PEPs, CTFs and EISs (non-distance) | ||||
| 1.9 | R | There is no right to cancel a non-distance contract: | ||
| (1) | to open or transfer an ISA (mini or maxi and including all components whatever the underlying investment, but not a cash deposit ISA or an ISA containing a life policy); or | |||
| (2) | to open or transfer a CTF; or | |||
| (3) | to transfer a PEP; or | |||
| (4) | for an EIS; | |||
| provided that: | ||||
| (5) | (for an EIS, ISA or PEP) the right to cancel is replaced with a seven calendar day, pre-contract right to withdraw the consumer's offer; or | |||
| (6) | the contract relates to an EIS or a non-packaged product ISA, PEP or CTF and is entered into following an explanation that neither a right to cancel nor a right to withdraw will apply given in accordance with the relevant rules on pre-contractual disclosure; or | |||
| (7) | (for an ISA or EIS) the contract entered into is a second or subsequent ISA or EIS on substantially the same terms (such as mini-to-mini ISA or maxi-to-maxi ISA) as an ISA or EIS purchased from the same ISA manager or EIS manager in the previous tax year. | |||
| Exemptions for distance contracts (all products and services) | ||||
| 1.10 | R | There is no right to cancel a distance contract: | ||
| (1) | whose price depends on fluctuations in the financial market outside the firm's control, which may occur during the cancellation period, such as: | |||
| (a) | foreign exchange; or | |||
| (b) | money market instruments; or | |||
| (c) | transferable securities; or | |||
| (d) | units in collective investment undertakings; or | |||
| (e) | financial-futures contracts, including equivalent cash-settled instruments; or | |||
| (f) | forward interest-rate agreements; or | |||
| (g) | interest-rate, currency and equity swaps; or | |||
| (h) | options to acquire or dispose of any instruments referred to above including cash-settled instruments and options on currency and on interest rates; or | |||
| (2) | whose performance has been fully completed by both parties at the consumer's express request before the consumer exercises his right to cancel; or | |||
| (3) | 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: article 6(2) and recital 19 of the Distance Marketing Directive] | ||||
| 1.11 | R | In the case of distance contracts for financial services comprising an initial service agreement followed by successive operations or a series of separate operations of the same nature performed over time, the right to cancel shall apply only to the initial agreement. | ||
| [Note: article 1(2) of the Distance Marketing Directive] | ||||
- 01/11/2007
COBS 16
Reporting information to clients
COBS 16.1
General client reporting requirement
- 01/11/2007
COBS 16.1.1
See Notes
A firm must ensure in relation to MiFID or equivalent third country business that a client receives adequate reports on the services provided to it by the firm. The reports must include, where applicable, the costs associated with the transactions and services undertaken by the firm on behalf of the client.
[Note: article 19(8) of MiFID]
- 01/11/2007
COBS 16.2
Occasional reporting
- 01/11/2007
Execution of orders other than when managing investments
COBS 16.2.1
See Notes
- (1) If a firm has carried out an order in the course of its designated investment business on behalf of a client, it must:
- (a) promptly provide the client, in a durable medium, with the essential information concerning the execution of the order;
- (b) in the case of a retail client, send the client a notice in a durable medium confirming the execution of the order and such of the trade confirmation information as is applicable:
- (i) as soon as possible and no later than the first business day following that execution; or
- (ii) if the confirmation is received by the firm from a third party, no later than the first business day following receipt of the confirmation from the third party; and
- (c) supply a client, on request, with information about the status of his order.
- (2) Paragraph (1) does not apply to a firm managing investments.
- (3) Paragraph (1)(b) does not apply if the confirmation would contain the same information as a confirmation that is to be promptly dispatched to the client by another person.
- (4) Paragraphs (1)(a) and (b) do not apply to an order executed on behalf of a client that relates to a bond funding a mortgage loan agreement with the client. The report on the transaction must be made at the same time as the terms of the mortgage loan are communicated, but no later than one month after the execution of the order.
- (5) If a firm carries out an order for a retail client relating to units or shares in a collective investment undertaking that is part of a series of orders that are executed periodically, it must:
- (a) comply with paragraph (1)(b) in relation to that order; or
- (b) provide the client at least once every six months with such of the trade confirmation information as is applicable in relation to each transaction in that series carried out in the relevant reporting period.
[Note: article 40 paragraphs (1) to (4) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.2.2
See Notes
- 01/11/2007
COBS 16.2.3
See Notes
For the purposes of calculating the unit price in the trade confirmation information, where the order is executed in tranches, the firm may supply the client with information about the price of each tranche or the average price. If the average price is provided, the firm must supply the retail client with information about the price of each tranche upon request.
[Note: article 40(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.2.3A
See Notes
In determining what is essential information, a firm should consider including:
- (1) for transactions in a derivative:
- (a) the maturity, delivery or expiry date of the derivative;
- (b) in the case of an option, a reference to the last exercise date, whether it can be exercised before maturity and the strike price;
- (c) if the transaction closes out an open futures position, all essential details required in respect of each contract comprised in the open position and each contract by which it was closed out and the profit or loss to the client arising out of closing out that position (a difference account);
- (2) for the exercise of an option:
- (a) the date of exercise, and either the time of exercise or that the client will be notified of that time on request;
- (b) whether the exercise creates a sale or purchase in the underlying asset; and
- (c) the strike price of the option (for a currency option, the rate of exchange will be the same as the strike price) and, if applicable, the total consideration from or to the client; and
- (3) the fact that the transaction involves any dividend or capitalisation or other right which has been declared, but which has not been paid, allotted or otherwise become effective in respect of the investment, and under the terms of the transaction the benefit of which will not pass to the purchaser.
- 01/11/2007
Guidance on the requirements
COBS 16.2.4
See Notes
- 01/11/2007
COBS 16.2.5
See Notes
- 01/11/2007
Special cases
COBS 16.2.6
See Notes
In relation to business that is not MiFID or equivalent third country business, a firm need not despatch a confirmation if:
- (1) the firm has agreed with the client (in the case of a retail client, in writing and with the client's informed consent) that confirmations need not be supplied, either generally or in specified circumstances; or
- (2) the designated investment is a life policy or a personal pension scheme (other than a SIPP); or
- (3) the designated investment is held within a CTF and the annual statement provided under the CTF Regulations includes the information that would have been contained in a confirmation under this section (other than information that has since become irrelevant).
- 01/11/2007
Record keeping: occasional reporting
COBS 16.2.7
See Notes
A firm must retain a copy of any confirmation despatched to a client under this section:
- (1) for MiFID or equivalent third country business, for a period of at least five years; or
- (2) for business that is not MiFID or equivalent third country business, for a period of at least three years;
[Note: see article 51(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3
Periodic reporting
- 01/11/2007
Provision by the firm and contents
COBS 16.3.1
See Notes
- (1) If a firm is managing investments on behalf of a client, it must provide the client with a periodic statement in a durable medium unless such a statement is provided by another person.
- (2) If the client is a retail client, the periodic statement must include such of the periodic information as is applicable.
[Note: article 41(1) and (2) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3.2
See Notes
- (1) In the case of a retail client, the periodic statement must be provided once every six months, except in the following cases:
- (a) if the retail client so requests, the periodic statement must be provided every three months;
- (b) if the retail client elects to receive information about executed transactions on a transaction-by-transaction basis (COBS 16.3.3 R) and there are no transactions in derivatives or other securities giving the right to acquire or sell a transferable security or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures, the periodic statement must be provided at least once every twelve months;
- (c) if the agreement between a firm and a retail client for the managing of investments authorises a leveraged portfolio, the periodic statement must be provided at least once a month.
- (2) A firm must inform a retail client that he has the right to request the provision of a periodic statement every three months.
[Note: article 41(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3.3
See Notes
- (1) If the client elects to receive information about executed transactions on a transaction-by-transaction basis, a firm managing investments must provide promptly to the client, on the execution of a transaction, the essential information concerning that transaction in a durable medium.
- (2) If the client is a retail client, the firm must send him a notice confirming the transaction and containing such of the information identified in column (1) of the table in COBS 16 Annex 1R as is applicable:
- (a) no later than the first business day following that execution; or
- (b) if the confirmation is received by the firm from a third party, no later than the first business day following receipt of the confirmation from the third party;
- unless the confirmation would contain the same information as a confirmation that is to be promptly dispatched to the retail client by another person.
[Note: article 41(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3.4
See Notes
- 01/11/2007
COBS 16.3.5
See Notes
For the purposes of calculating the unit price in the trade confirmation information or periodic information, where the order is executed in tranches, the firm may supply the client with information about the price of each tranche or the average price. If the average price is provided, the firm must supply the retail client with information about the price of each tranche upon request.
[Note: article 40(4) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3.6
See Notes
- (1) If a firm:
- (a) manages investments for a retail client; or
- (b) operates a retail client account that includes an uncovered open position in a contingent liability transaction,
- it must report to the retail client any losses exceeding any predetermined threshold, agreed between it and the retail client.
- (2) The firm must report:
- (a) no later than the end of the business day in which the threshold is exceeded; or
- (b) if the threshold is exceeded on a non-business day, the close of the next business day.
[Note: article 42 of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3.7
See Notes
For the purposes of this section, a contingent liability transaction is one that involves any actual or potential liability for the client that exceeds the cost of acquiring the instrument.
[Note: recital 63 of the MiFID implementing Directive]
- 01/11/2007
COBS 16.3.8
See Notes
- 01/11/2007
Guidance on contingent liability transaction
COBS 16.3.9
See Notes
When providing a periodic statement to a retail client, a firm should consider whether to include:
- (1) the collateral value in respect of any contingent liability transaction in the client's portfolio during the relevant period; and
- (2) option account valuations in respect of each open option written by the client in the client's portfolio at the end of the relevant period; stating:
- (a) the share, future, index or other investment involved;
- (b) the trade price and date for the opening transaction, unless the valuation statement follows the statement for the period in which the option was opened;
- (c) the market price of the contract; and
- (d) the exercise price of the contract.
- (3) Option account valuations may show an average trade price and market price in respect of an option series if the retail client buys a number of contracts within the same series.
- 01/11/2007
Periodic reporting: special situations
COBS 16.3.10
See Notes
In relation to business that is not MiFID or equivalent third country business, a firm need not provide a periodic statement:
- (1) to a client habitually resident outside the United Kingdom if the client concerned has so requested or the firm has taken reasonable steps to establish that he does not wish to receive it;
- (2) in respect of a CTF, if the annual statement provided under the CTF Regulations contains the periodic information.
- 01/11/2007
Record keeping: periodic reporting
COBS 16.3.11
See Notes
A firm must make, and retain, a copy of any periodic statement:
- (1) for MiFID or equivalent third country business, for a period of at least five years; or
- (2) for business that is not MiFID or, for a period of at least three years;
[Note: see article 51(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.4
Statements of client designated investments or client money
- 01/11/2007
COBS 16.4.1
See Notes
- (1) A firm that holds client designated investments or client money for a client must send that client at least once a year a statement in a durable medium of those designated investments or that client money unless such a statement has been provided in a periodic statement.
- (2) A credit institution need not send a statement in respect of deposits held by it.
- (3) This rule does not apply in relation to a firm holding client designated investments or client money under a personal pension scheme or a stakeholder pension scheme where doing so is not MiFID or equivalent third country business.
[Note: article 43(1) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.4.2
See Notes
A firm must include in a statement of client assets referred to under this section the following information:
- (1) details of all the designated investments or client money held by the firm for the client at the end of the period covered by the statement;
- (2) the extent to which any client designated investments or client money have been the subject of securities financing transactions; and
- (3) the extent of any benefit that has accrued to the client by virtue of participation in any securities financing transactions, and the basis on which that benefit has accrued.
[Note: article 43(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.4.3
See Notes
In cases where the portfolio of a client includes the proceeds of one or more unsettled transactions, the information in a statement provided under this section may be based either on the trade date or the settlement date, provided that the same basis is applied consistently to all such information in the statement.
[Note: article 43(2) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.4.4
See Notes
[Note: article 43(3) of the MiFID implementing Directive]
- 01/11/2007
COBS 16.4.5
See Notes
In reporting to a client in accordance with this section, a firm should consider whether to provide details of any assets loaned or charged including:
- (1) which investments (if any) were at the end of the relevant period loaned to any third party and which investments (if any) were at that date charged to secure borrowings made on behalf of the portfolio; and
- (2) the aggregate of any interest payments made and income received during the period in respect of loans or borrowings made during that period
- 01/11/2007
COBS 16.5
Quotations for surrender values
- 01/11/2007
COBS 16.5.1
See Notes
- 01/11/2007
COBS 16.6
Communications to clients - life insurance, long term care insurance and income withdrawals
- 06/08/2008
Disclosure for life insurance contracts: information to be provided during the term of the contract
COBS 16.6.1
See Notes
This section applies to a long-term insurer, unless, at the time of application, the client, other than an EEA ECA recipient, was habitually resident:
- (1) in an EEA State other than the United Kingdom; or
- (2) outside the EEA and he was not present in the United Kingdom.
- 01/11/2007
COBS 16.6.2
See Notes
If during the term of a life policy entered into on or after 1 July 1994 there is any proposed change in the information referred to in paragraphs (1) to (12) of the Consolidated Life Directive information (COBS 13 Annex 1) the long-term insurer must inform the policyholder of the effect of the change before the change is made.
[Note: article 36(2) of the Consolidated Life Directive]
- 01/11/2007
COBS 16.6.3
See Notes
If a life policy entered into on or after 1 July 1994 provides for the payment of bonuses and the amounts of bonuses are unspecified, the long-term insurer must, in every calendar year except the first, either:
- (1) notify the policyholder in writing of the amount of any bonus which has become payable under the contract, and which has not previously been notified under this rule; or
- (2) give the policyholder in writing sufficient information to enable him to determine the amount of any such bonus.
- 01/11/2007
COBS 16.6.4
See Notes
- (1) When a firm provides information in accordance with this section, it must provide the information in a durable medium, unless (2) applies.
- (2) If the contract is being made by telephone, the firm may give the information orally to the customer. If the customer enters into the contract, a written version of the required information must be sent to the customer within five business days of the contract being entered into.
- 01/11/2007
COBS 16.6.5
See Notes
- 01/11/2007
COBS 16.6.6
See Notes
- 01/11/2007
Long term care insurance
COBS 16.6.7
See Notes
At each anniversary of the date on which a long-term care insurance contract which is based on single premium investment bonds was entered into, the insurer must:
- (1) provide the retail client with a table based on the format of COBS 13 Annex 3 2.2R containing at least the current fund value and projected future policy values (as in column "What you might get back");
- (2) where it is the case, inform the retail client of the possibility that future policy values may be insufficient to fulfil the original purpose of the contract; and
- (3) inform the retail client how to obtain advice on investments in respect of long-term care insurance contracts, and that it is in his best interest to do so.
- 01/11/2007
Income withdrawals
COBS 16.6.8
See Notes
At intervals no longer than 12 months from the date of an election by a retail client to make income withdrawals, the relevant product provider must:
- (1) provide the retail client with such information required by COBS 13 Annex 2 2.9R as will enable the retail client to review the election; and
- (2) inform the retail client how to obtain advice on investments in respect of his income withdrawals, and that it would be in his best interests to do so.
- 01/11/2007
COBS 16 Annex 1R
Trade confirmation and periodic information
- 01/11/2007
See Notes
| The information below must be provided, where relevant for the purposes of reporting to a retail client, in accordance with SUP 17 Annex 1 | (1) Trade confirmation information | (2) Periodic information (where trade confirmation information is not provided on a transaction by transaction basis, to be provided for each transaction carried out during the reporting period) | |
| General | |||
| 1. | the reporting firm identification; | Y | |
| 2. | the name or other designation of the client; | Y | |
| 3. | the trading day; | Y | Y |
| 4. | the trading time; | Y | Y |
| 5. | the type of the order (for example, a limit order or a market order); | Y | Y |
| 6. | the venue identification; | Y | Y |
| 7. | the instrument identification; | Y | Y |
| 8. | the buy/sell indicator; | Y | Y |
| 9. | the nature of the order if other than buy/sell; | Y | Y |
| 10. | the quantity; | Y | Y |
| 11. | the unit price; | Y | Y |
| 12. | the total consideration; | Y | Y |
| 13. | a total sum of the commissions and expenses charged and, where the retail client so requests, an itemised breakdown, including, where relevant the amount of any mark-up or mark-down imposed by the firm or its associate where the firm or associate acted as principal in executing the transaction, and the firm owes a duty of best execution to the client; | Y | Y |
| 14. | the rate of exchange obtained where the transaction involves a conversion of currency; | Y | Y |
| 15. | [intentionally blank] | ||
| 16. | [intentionally blank] | ||
| 17. | the client's responsibilities in relation to the settlement of the transaction, including the time limit for payment or delivery as well as the appropriate account details where these details and responsibilities have not previously been notified to the client; and | Y | |
| 18. | if the client's counterparty was the firm itself or any person in the firm's group or another client of the firm, the fact that this was the case unless the order was executed through a trading system that facilitates anonymous trading. | Y | |
| [Note: article 40(4) and recital 64 to the MiFID implementing Directive] | |||
| A firm may provide the client with the information referred to in this Annex using standard codes if it also provides an explanation of the codes used. | |||
| [Note: article 40(5) of the MiFID implementing Directive] | |||
- 01/11/2007
COBS 16 Annex 2R
Information to be included in a Periodic report
- 01/11/2007
See Notes
| Periodic information (all cases) | ||
| 1. | the name of the firm; | |
| 2. | the name or other designation of the retail client's account; | |
| 3. | a statement of the contents and the valuation of the portfolio, including details of: | |
| (a) | each designated investment held, its market value or fair value if market value is unavailable; | |
| (b) | the cash balance at the beginning and at the end of the reporting period; and | |
| (c) | the performance of the portfolio during the reporting period; | |
| 4. | the total amount of fees and charges incurred during the reporting period, itemising at least total management fees and total costs associated with execution, and including, where relevant, a statement that a more detailed breakdown will be provided on request; | |
| 5. | a comparison of performance during the period covered by the statement with the investment performance benchmark (if any) agreed between the firm and the client; | |
| 6. | the total amount of dividends, interest and other payments received during the reporting period in relation to the client's portfolio; and | |
| 7. | information about other corporate actions giving rights in relation to designated investments held in the portfolio. | |
| [Note: article 41(2) of MiFID implementing Directive] | ||
- 01/11/2007
COBS 17
Claims handling for long-term care
insurance
COBS 17.1
Providing information to claimants and dealing with claims
- 01/11/2007
COBS 17.1.1
See Notes
When an insurer or managing agent receives a claim under a long-term care insurance contract, it must respond promptly by providing the policyholder, or the person acting on the policyholder's behalf, with:
- (1) a claim form (if it requires one to be completed);
- (2) a summary of its claims handling procedure; and
- (3) appropriate information about the medical criteria that must be met, and any waiting periods that apply, under the terms of the policy.
- 01/11/2007
Responding to a claim
COBS 17.1.2
See Notes
As soon as reasonably practicable after receipt of a claim, the insurer or managing agent must tell the policyholder, or the person acting on the policyholder's behalf:
- (1) (for each part of the claim it accepts), whether the claim will be settled by paying the policyholder, providing goods or services to the policyholder or paying another person to provide those goods or services; and
- (2) (for each part of the claim it rejects), why the claim has been rejected and whether any future rights to claim exist.
- 01/11/2007
Rejecting a claim
COBS 17.1.3
See Notes
An insurer and a managing agent must not:
- (1) unreasonably reject a claim; or
- (2) except where there is evidence of fraud, reject a claim for:
- (a) non-disclosure of a fact material to the risk which the policyholder could not reasonably have been expected to disclose; or
- (b) misrepresentation of a fact material to the risk, unless the misrepresentation is negligent; or
- (c) breach of warranty, unless the circumstances of the claim are connected to the breach, the warranty is material to the risk and was drawn to the policyholder's attention before the conclusion of the contract.
- 01/11/2007
COBS 18
Specialist Regimes
COBS 18.1
Trustee Firms
- 01/11/2007
Application
COBS 18.1.1
See Notes
- 01/11/2007
Application of COBS to trustee firms
COBS 18.1.2
See Notes
| COBS | Description |
| 6.2 | Describing the breadth of a firm's advice on investments |
| 6.3 | Disclosing information about services, fees and commission - packaged products |
| 6.4 | Disclosure of charges, remuneration and commission |
| 9.4 | Suitability reports |
| 9.6 | Special rules for providing basic advice on a stakeholder product |
| 16.3.9 | Guidance on contingent liability transaction |
| 16.5 | Quotations for surrender values |
| 16.6 | Life insurance contracts - communications to clients |
| 16 Annex 1 R (1) 14 | Information to be provided in accordance with COBS 16.2.1 R and 16.3 |
- 01/11/2007
COBS 18.1.3
See Notes
| COBS | Description |
| 5 | Distance communications |
| 13 | Preparing product information |
| 14.2 | Providing product information |
| 15 | Cancellation |
| 17 | Claims handling for long-term care insurance |
| 18.2 | Energy market activity and oil market activity |
| 18.3 | Corporate finance business |
| 18.4 | Stock lending activity |
| 19 | Pensions - supplementary provisions |
| 20 | With-profits |
- 01/11/2007
Duties of trustee firms under the general law
COBS 18.1.4
See Notes
To the extent a rule in COBS applies to a trustee firm, that rule:
- (1) applies in addition to any duties or powers imposed or conferred upon a trustee by the general law; and
- (2) does not qualify or restrict the duties or powers that the general law imposes or confers upon a trustee; trustee firms will be under a duty to observe the provisions of their trust instrument; if its provisions conflict with any applicable rule, trustee firms will need to take advice in resolving the conflict.
- 01/11/2007
Considering and complying with applicable COBS rules
COBS 18.1.5
See Notes
- 01/11/2007
References to "client" in applicable COBS rules
COBS 18.1.6
See Notes
- 01/11/2007
COBS 18.2
Energy market activity and oil market activity
- 01/11/2007
Energy market activity and oil market activity - MiFID business
COBS 18.2.1
See Notes
| COBS | Description |
| 6.2 | Describing the breadth of a firm's advice on investments |
| 6.3 | Disclosing information about services, fees and commission - packaged products |
| 6.4 | Disclosure of charges, remuneration and commission |
| 9.4 | Suitability reports |
| 9.6 | Special rules for providing basic advice on a stakeholder product |
| 11.6 | Use of dealing commission |
| 16.3.9 | Guidance on contingent liability transaction |
| 16.5 | Quotations for surrender values |
| 16.6 | Life insurance contracts - communications to clients |
| 16 Annex 1 R (1) 14 | Information to be provided in accordance with COBS 16.2.1 R and 16.3 |
- 01/11/2007
COBS 18.2.2
See Notes
| COBS | Description |
| 5 | Distance communications |
| 7 | Insurance mediation |
| 13 | Preparing product information |
| 14.2 | Providing product information to clients |
| 15 | Cancellation |
| 17 | Claims handling for long-term care insurance |
| 18.1 | Trustee firms' regime |
| 18.3 | Corporate finance business |
| 18.4 | Stock lending activity |
| 19 | Pensions - supplementary provisions |
| 20 | With-profits |
- 01/11/2007
Energy market activity and oil market activity - non-MiFID business
COBS 18.2.3
See Notes
Only the COBS provisions in the table apply to energy market activity or oil market activity carried on by a firm which is not:
- (1) MiFID or equivalent third country business; or
- (2) energy market activity or oil market activity set out in COBS 18.2.4 R.
| COBS | Description |
| 1 | Application |
| 2.1.1 | Acting honestly, fairly and professionally |
| 2.4 | Agent as client and reliance on others |
| 3 | Client categorisation |
| 4 | Communication to clients including financial promotions, but only in relation to communicating or approving a financial promotion |
| 5.2 | E-commerce |
| 12 | Investment research |
| 16.2 | Occasional reporting |
- 01/11/2007
Energy market activity and oil market activity - dealings with or through authorised persons
COBS 18.2.4
See Notes
| COBS | Description |
| 1 | Application |
| 2.4 | Agent as client and reliance on others |
| 4.12 | Unregulated collective investment schemes |
| 5.2 | E-commerce |
- 01/11/2007
Other non-MiFID business related to commodity or exotic derivative instruments
COBS 18.2.5
See Notes
COBS applies as set out in the table to firms in respect of activities referred to in the general application rule related to:
- (1) commodity futures; or
- (2) commodity options; or
- (3) contracts for differences related to an underlying commodity; or
- (4) other futures or contracts for differences which are not related to commodities, financial instruments or cash;
- which is not MiFID or equivalent third country business and energy market activity or oil market activity.
| Application of COBS to other non-MiFID business related to commodity derivative instruments |
| All of COBS applies, except COBS 18.2.6 R to COBS 18.2.9 E applies instead of COBS 11.2 (Best execution) |
- 01/11/2007
Best execution for other non-MIFID business related to commodity and exotic derivative instruments
COBS 18.2.6
See Notes
- 01/11/2007
Exceptions to best execution
COBS 18.2.7
See Notes
The duty to provide best execution does not apply where:
- (1) the firm has agreed with a professional client that it does not owe a duty of best execution to him; or
- (2) the firm relies on another person to whom it passes a customer order for execution to provide best execution, but only if it has taken reasonable care to ensure that he will do so.
- 01/11/2007
Providing best execution
COBS 18.2.8
See Notes
To provide best execution, a firm must:
- (1) take reasonable care to ascertain the price which is the best available for the customer order in the relevant market at the time for transactions of the kind and size concerned; and
- (2) execute the customer order at a price which is no less advantageous to the customer, unless the firm has taken reasonable steps to ensure that it would be in the customer's best interests not to do so.
- 01/11/2007
COBS 18.2.9
See Notes
- (1) In order to take reasonable care to ascertain the price which is the best available, a firm:
- (a) should disregard any charges and commission made by it or its agents that are disclosed to the customer under COBS 6.1.9 R (Information about costs and associated charges);
- (b) need not have access to competing exchanges, or to all, or a minimum number of, available price sources; but if a firm can access prices displayed by different exchanges and trading platforms and make a direct and immediate comparison, it should execute the customer order at the best price available to the firm on such exchanges or trading platforms, if this is in the best interests of the customer;
- (c) should pass on to the customer the price at which it executes the transaction to meet the customer order; and
- (d) should not take a mark-up or mark-down from the price at which it executes the customer order.
- (2) Compliance with (1) may be relied on as tending to establish compliance with the requirement to take reasonable care to ascertain the price which is the best available for the customer order (see COBS 18.2.8 R (1))
- (3) Contravention of (1) may be relied on as tending to establish contravention of the requirement to take reasonable care to ascertain the price which is the best available for the customer order (see COBS 18.2.8 R (1))
- 01/11/2007
COBS 18.3
Corporate finance business
- 01/11/2007
Corporate finance business - MiFID business
COBS 18.3.1
See Notes
| COBS | Description |
| 6.2 | Describing the breadth of a firm's advice on investments |
| 6.3 | Disclosing information about services, fees and commission - packaged products |
| 6.4 | Disclosure of charges, remuneration and commission |
| 9.4 | Suitability reports |
| 9.6 | Special rules for providing basic advice on a stakeholder product |
| 11.6 | Use of dealing commission |
| 16.3.9 | Guidance on contingent liability transaction |
| 16.5 | Quotations for surrender values |
| 16.6 | Life insurance contracts - communications to clients |
| 16 Annex 1 R (1) 14 | Information to be provided in accordance with COBS 16.2.1 R and 16.3 |
- 01/11/2007
COBS 18.3.2
See Notes
| COBS | Description |
| 5 | Distance communications, except in relation to distance contracts concluded with consumers |
| 7 | Insurance mediation |
| 13 | Preparing product information |
| 14.2 | Providing product information |
| 15 | Cancellation, except cancellation and withdrawal rights in relation to distance contracts concluded with consumers |
| 17 | Claims handling for long-term care insurance |
| 18.1 | Trustee firms' regime |
| 18.2 | Energy market activity and oil market activity |
| 18.4 | Stock lending activity |
| 19 | Pensions - supplementary provisions |
| 20 | With-profits |
- 01/11/2007
Corporate finance business - non-MiFID business
COBS 18.3.3
See Notes
| COBS | Description |
| 1 | Application |
| 2.1.1 | Acting honestly, fairly and professionally |
| 2.3 | Inducements |
| 2.4 | Agent as client and reliance on others |
| 3 | Client categorisation |
| 4 | Communication to clients including financial promotions, except COBS 4.5 - COBS 4.11 |
| 5.1 | The information and other requirements of the Distance Marketing Directive, but only in relation to distance contracts concluded with consumers |
| 5.2 | E-commerce |
| 11.7 | Personal account dealing |
| 12 | Investment research |
| 15 | Cancellation, but only in relation to distance contracts concluded with consumers |
- 01/11/2007
COBS 18.3.4
See Notes
- 01/11/2007
COBS 18.4
Stock lending activity
- 01/11/2007
COBS 18.4.1
See Notes
| COBS | Subject |
| 6.2 | Describing the breadth of a firm's advice on investments |
| 6.3 | Disclosing information about services, fees and commission - packaged products |
| 6.4 | Disclosure of charges, remuneration and commission |
| 9.4 | Suitability reports |
| 9.6 | Special rules for providing basic advice on a stakeholder product |
| 11.6 | Use of dealing commission |
| 16.3.9 | Guidance on contingent liability transaction |
| 16.5 | Quotations for surrender values |
| 16.6 | Life insurance contracts - communications to clients |
| 16 Annex 1 R (1) 14 | Information to be provided in accordance with COBS 16.2.1 R and 16.3 |
- 01/11/2007
COBS 18.4.2
See Notes
| COBS | Description |
| 5 | Distance communications, except in relation to distance contracts concluded with consumers |
| 7 | Insurance mediation |
| 13 | Preparing product information |
| 14.2 | Providing product information |
| 15 | Cancellation, except cancellation and withdrawal rights in relation to distance contracts concluded with consumers |
| 17 | Claims handling for long-term care insurance |
| 18.1 | Trustee firms' regime |
| 18.2 | Energy market activity and oil market activity |
| 18.3 | Corporate finance business |
| 19 | Pensions - supplementary provisions |
| 20 | With-profits |
- 01/11/2007
COBS 18.5
Operators of collective investment schemes
- 01/11/2007
Application
COBS 18.5.1
See Notes
- 01/11/2007
Application or modification of general COBS rules for operators
COBS 18.5.2
See Notes
An operator when it is carrying on scheme management activity:
Table: Application of conduct of business rules
Application of conduct of business rules
| Chapter, section or rule | Description | Modifications |
| 1 | Application | |
| 2.1.1 | Acting honestly, fairly and professionally | |
| 2.3 | Inducements | |
| 2.4 | Agent as client and reliance on others | |
| 4.2.1 - 4.2.3 | Fair, clear and not misleading communications | |
| 5.2 | E-Commerce | |
| 11.2 | Best execution | In the case of an unregulated collective investment scheme, COBS 18.5.4R (Modification of best execution) applies instead of COBS 11.2 in the circumstances set out in COBS 18.5.4R. |
| 11.3 | Client order handling | |
| 11.5 | Record keeping: client orders and decisions to deal | |
| 11.6 | Use of dealing commission | |
| 18.5 | Operators of collective investment schemes |
- 01/11/2007
General modifications
COBS 18.5.3
See Notes
The COBS rules specified in the table in COBS 18.5.2 R apply to an operator when it is carrying on scheme management activity with the following modifications:
- (1) subject to (2), references to customer or client are to be construed as references to any scheme in respect of which the operator is acting or intends to act, and with or for the benefit of which the relevant activity is to be carried on;
- (2) in the case of an unregulated collective investment scheme, when an operator is required by the rules in COBS to provide information to, or obtain consent from, a customer or client, the operator must ensure that the information is provided to, or consent obtained from, a participant or a potential participant in the scheme as the case may be; and
- (3) references to the service of portfolio management in COBS 11.2 and 11.3 and COBS 11.5 (Record keeping: client orders and transactions) are to be construed as references to the management by an operator of financial instruments held for or within the scheme of which it is the operator.
- 01/11/2007
Modification of best execution for operators of unregulated collective investment schemes
COBS 18.5.4
See Notes
The best execution provisions applying to an operator of a collective investment scheme do not apply in relation to an unregulated collective investment scheme whose scheme documents include a statement that best execution does not apply in relation to the scheme and in which:
- (1) no participant is a retail client; or
- (2) no current participant in the scheme was a retail client on joining the scheme as a participant.
- 01/11/2007
Scheme documents for an unregulated collective investment scheme
COBS 18.5.5
See Notes
- 01/11/2007
Format and content of scheme documents
COBS 18.5.6
See Notes
- 01/11/2007
COBS 18.5.7
See Notes
- 01/11/2007
COBS 18.5.8
See Notes
Where the scheme is an unregulated collective investment scheme and no current participant in the scheme was a retail client on joining the scheme as a participant, the scheme documents must include a statement that:
- (1) explains that if a participant is reclassified as a retail client subsequent to joining the scheme as a participant, then the operator may continue to treat all participants in the scheme as though they were not retail clients;
- (2) explains that if a participant is reclassified as a retail client subsequent to joining the scheme as a participant, then the modification of best execution (see COBS 18.5.5 R) will continue to apply to that scheme; and
- (3) explains that, in the event of such a reclassification, the operator will not be required to provide best execution in relation to the scheme.
- 01/11/2007
COBS 18.5.9
See Notes
- 01/11/2007
Adequate information
COBS 18.5.10
See Notes
- (1) In order to provide adequate information to describe how the operation of the scheme is governed, an operator of an unregulated collective investment scheme should include in the scheme documents a provision about each of the items of relevant information set out in the following table (Content of scheme documents).
- (2) Compliance with (1) may be relied on as tending to establish compliance with COBS 18.5.5 R.
- (3) Contravention of (1) may be relied on as tending to establish contravention of COBS 18.5.5 R.
Content of scheme documents
| The scheme documents should include provision about: | |||
| (1) | Regulator The firm statutory status in accordance with GEN 4 Annex 1 R (Statutory status disclosure); |
||
| (2) | Services the nature of the services that the operator will provide in relation to the scheme; |
||
| (3) | Payments for services details of any payment for services payable by the scheme or from the property of the scheme or participants in the scheme to the operator, including where appropriate: |
||
| (a) | the basis of calculation; | ||
| (b) | how it is to be paid and collected; | ||
| (c) | how frequently it is to be paid; and | ||
| (d) | whether or not any other payment is receivable by the operator (or to its knowledge by any of its associates) in connection with any transactions effected by the operator with or for the scheme, in addition to or in lieu of any fees; | ||
| (4) | Commencement when and how the operator is appointed; |
||
| (5) | Accounting the arrangements for accounting to the scheme or participants in the scheme for any transaction effected; |
||
| (6) | Termination method how the appointment of the operator may be terminated; |
||
| (7) | Complaints procedure how to complain to the operator and a statement that the participants in the scheme may subsequently complain direct to the Financial Ombudsman Service; |
||
| (8) | Compensation whether or not compensation may be available from the compensation scheme should the operator be unable to meet its liabilities, and information about any other applicable compensation scheme; and, for each applicable scheme, the extent and level of cover and how further information can be obtained; |
||
| (9) | Investment objectives the investment objectives for the portfolio of the scheme; |
||
| (10) | Restrictions | ||
| (a) | any restrictions on: | ||
| (i) | the types of investments or property which may be included in the portfolio of the scheme; | ||
| (ii) | the markets on which investments or property may be acquired for the portfolio of the scheme; | ||
| (iii) | the amount or value of any one investment or asset, or on the proportion of the portfolio of the scheme which any one investment or asset or any particular kind of investment or asset may constitute; or | ||
| (b) | that there are no such restrictions; | ||
| (11) | Holding scheme assets | ||
| (a) | if it is the case, that the operator will: | ||
| (i) | hold money on behalf of the scheme or be the custodian of investments or other property of the scheme; or | ||
| (ii) | arrange for some other person to act in either capacity and, if so, whether that person is an associate of the operator identifying that person and describing the nature of any association; and | ||
| (b) | in either case: | ||
| (i) | how any money is to be deposited; | ||
| (ii) | the arrangements for recording and separately identifying registrable investments of the scheme and, where the registered holder is the operator's own nominee, that the operator will be responsible for the acts and omissions of that person; | ||
| (iii) | the extent to which the operator accepts liability for any loss of the investment of the scheme; | ||
| (iv) | the extent to which the operator or any other person mentioned in (11)(a)(ii), may hold a lien or security interest over investments of the scheme; | ||
| (v) | where investments of the scheme will be registered collectively in the same name, a statement that the entitlements of the scheme may not be identifiable by separate certificates or other physical documents of title, and that, should the operator default, any shortfall in investments of the scheme registered in that name may be shared proportionately among all schemes and any other customers of the operator whose investments are so registered; | ||
| (vi) | whether or not investments or other property of the scheme can be lent to, or deposited by way of collateral with, a third party and whether or not money can be borrowed on behalf of the scheme against the security of those investments or property and, if so, the terms upon which they may be lent or deposited; | ||
| (vii) | the arrangements for accounting to the scheme for investments of the scheme , for income received (including any interest on money and any income earned by lending investments or other property) of the scheme, and for rights conferred in respect of investments or other property of the scheme; | ||
| (viii) | the arrangements for determining the exercise of any voting rights conferred by investments of the scheme; and | ||
| (ix) | where investments of the scheme may be held by an eligible custodian outside the United Kingdom, a general statement that different settlement, legal and regulatory requirements, and different practices relating to the segregation of those investments, may apply; | ||
| (12) | Clients' money outside the United Kingdom if it is the case, that the operator may hold the money of the scheme in a client bank account outside the United Kingdom; |
||
| (13) | Exchange rates if a liability of the scheme in one currency is to be matched by an asset in a different currency, or if the services to be provided to the operator for the scheme may relate to an investment denominated in a currency other than the currency in which the investments of the scheme are valued, a warning that a movement of exchange rates may have a separate effect, unfavourable or favourable, on the gain or loss otherwise made on the investments of the scheme; |
||
| (14) | Stabilised investments if it is the case, that the operator is to have the right under the scheme documents to effect transactions in investments the prices of which may be the subject of stabilisation; |
||
| (15) | Conflict of interest and material interest if it is the case, that the operator is to have the right under the agreement or instrument constituting the scheme to effect transactions on behalf of the scheme in which the operator has directly or indirectly a material interest (except for an interest arising solely from the participation of the operator as agent for the scheme), or a relationship of any description with another party which may involve a conflict with the operator's duty to the scheme, together with a disclosure of the nature of the interest or relationship; |
||
| (16) | Use of dealing commission if the operator receives goods or services in addition to the execution of its customer orders in accordance with the section on the use of dealing commission, the prior disclosure required by the rule on prior disclosure (see COBS 11.6.2 R); |
||
| (17) | Acting as principal if it is the case, that the operator may act as principal in a transaction with the scheme; |
||
| (18) | Stock lending if it is the case, that the operator may undertake stock lending activity with or for the scheme specifying the type of assets of the scheme to be lent, the type and value of relevant collateral from the borrower and the method and amount of payment due to the scheme in respect of the lending; |
||
| (19) | Transactions involving contingent liability investments | ||
| (a) | if it is the case, that the agreement or instrument constituting the scheme allows the operator to effect transactions involving contingent liability investments for the account of the portfolio of the scheme; | ||
| (b) | if applicable, whether there are any limits on the amount to be committed by way of margin and, if so, what those limits are; and | ||
| (c) | if applicable, that the operator has the authority to effect transactions involving contingent liability investments otherwise than under the rules of a recognised investment exchange or designated investment exchange and in a contract traded thereon; | ||
| (20) | Periodic statements | ||
| (a) | the frequency of any periodic statement (this should not be less than once every 12 months) except where a periodic statement is not required (see COBS 18.5.13R); and | ||
| (b) | whether those statements will include some measure of performance, and, if so, what the basis of that measurement will be; | ||
| (21) | Valuation the bases on which assets comprised in the portfolio of the scheme are to be valued; |
||
| (22) | Borrowings if it is the case, that the operator may supplement the funds in the portfolio of the scheme and, if it may do so: |
||
| (a) | the circumstances in which the operator may do so; | ||
| (b) | whether there are any limits on the extent to which the operator may do so and, if so, what those limits are; and | ||
| (c) | any circumstances in which such limits may be exceeded; | ||
| (23) | Underwriting commitments if it is the case, that the operator may for the account of the portfolio of the scheme underwrite or sub-underwrite any issue or offer for sale of securities, and: |
||
| (a) | whether there are any restrictions on the categories of securities which may be underwritten and, if so, what these restrictions are; and | ||
| (b) | whether there are any financial limits on the extent of the underwriting and, if so, what these limits are; | ||
| (24) | Investments in other collective investment schemes whether or not the portfolio may contain units in a collective investment scheme either operated or advised by the operator or by an associate of the operator or in a collective investment scheme which is not a regulated collective investment scheme; |
||
| (25) | Investments in securities underwritten by the operator whether or not the portfolio may contain securities of which any issue or offer for sale was underwritten, managed or arranged by the operator or by an associate of the operator during the preceding 12 months. |
||
- 01/11/2007
Periodic statements for an unregulated collective investments scheme
COBS 18.5.11
See Notes
- 01/11/2007
Promptness, suitable intervals and adequate information
COBS 18.5.12
See Notes
- (1) An operator should act in accordance with the provisions in the right hand column of the periodic statements table (see COBS 18.5.15E) to fulfil the requirement to prepare and issue periodic statements indicated in the left hand column against these provisions.
- (2) Compliance with (1) may be relied on as tending to establish compliance with the requirement to prepare and issue periodic statements.
- (3) Contravention of (1) may be relied on as tending to establish contravention of the requirement to prepare and issue periodic statements.
- 01/11/2007
Exceptions from the requirement to provide a periodic statement
COBS 18.5.13
See Notes
- (1) An operator of an unregulated collective investment scheme need not provide a periodic statement:
- (a)
- (i) to a participant in the scheme who is a retail client ordinarily resident outside the United Kingdom; or
- (ii) to a participant in the scheme who is a professional client; if the participant has so requested or the operator has taken reasonable steps to establish that the participant does not wish to receive it; or
- (b) if it would duplicate a statement to be provided by someone else.
- (2) For a firm acting as an outgoing ECA provider, the exemption for retail client participants ordinarily resident outside the United Kingdom applies only to a participant in the scheme who is a retail client ordinarily resident outside the EEA.
- 01/11/2007
Record keeping requirements
COBS 18.5.14
See Notes
- 01/11/2007
COBS 18.5.15
See Notes
This table belongs to COBS 18.5.12 E.
| Periodic statements | |||||
| Suitable intervals | (1) | A periodic statement should be provided at least: | |||
| (a) | six-monthly; or | ||||
| (b) | once in any other period, not exceeding 12 months, which has been mutually agreed between the operator and the participant in the scheme. | ||||
| Adequate information | (2) | (a) | A periodic statement should contain: | ||
| (i) | (A) | The information set out in the table of general contents of a periodic statement; | |||
| (B) | where the portfolio of the scheme includes uncovered open positions in contingent liability investments, the additional information in the table listing the contents of a periodic statement (see COBS 18.5.15E) in respect of contingent liability investments; or | ||||
| (ii) | such information as a participant who is a retail client ordinarily resident outside the United Kingdom, or a professional client, has on his own initiative agreed with the operator as adequate. | ||||
| (b) | For a firm acting as an outgoing ECA provider, the words 'United Kingdom' is replaced by 'EEA' | ||||
- 01/11/2007
COBS 18.5.16
See Notes
Examples of uncovered open positions include:
- (1) selling a call option on an investment not held in the portfolio;
- (2) unsettled sales of call options on currency in amounts greater than the portfolio's holding of that currency in cash or in readily realisable investments denominated in that currency; and
- (3) transactions having the effect of selling an index to an amount greater than the portfolio's holdings of investments included in that index.
- 01/11/2007
COBS 18.5.17
See Notes
This table belongs to COBS 18.5.15 E.
| General contents of periodic statements | |||
| 1 | Contents and value | ||
| (a) | As at the beginning of the account period, the total value of the portfolio of the scheme , being either: | ||
| (i) | the value of the assets comprised in the portfolio on the date as at which the statement provided for the immediately preceding period of account is made up; or | ||
| (ii) | in the case of the first periodic statement, the value of the assets comprised in the portfolio on the date on which the operator assumed responsibility for the management of the portfolio. | ||
| (b) | As at the end of the account period: | ||
| (i) | the number, description and value of each investment held on behalf of the scheme; | ||
| (ii) | the amount of cash held on behalf of the scheme; and | ||
| (iii) | the total value of the portfolio of the scheme. | ||
| 2 | Basis of valuation A statement of the basis on which the value of each investment has been calculated and, if applicable, a statement that the basis for valuing a particular investment has changed since the previous periodic statement. Where any investments are shown in a currency other than the usual one used for valuation of the portfolio of the scheme , the relevant currency exchange rates must be shown. |
||
| 3 | Details of any assets loaned or charged | ||
| (a) | A summary of those investments (if any) which were, at the closing date, loaned to any third party and those investments (if any) that were at that date charged to secure borrowings made on behalf of the portfolio of the scheme; and | ||
| (b) | the aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during the period. | ||
| 4 | Transactions and changes in composition Except in the case of a portfolio which aims to track the performance of an external index: |
||
| (a) | a statement that summarises the transactions entered into for the portfolio of the scheme during the period; and | ||
| (b) | the aggregate of money and a summary of all investments transferred into and out of the portfolio of the scheme during the period; and | ||
| (c) | the aggregate of any interest payments, dividends and other benefits received by the operator for the portfolio of the scheme during that period. | ||
| 5 | Charges and remuneration If not previously advised in writing, a statement for the account period: |
||
| (a) | of the aggregate charges of the operator and its associates; and | ||
| (b) | of any remuneration received by the operator or its associates or both from a third party in respect of the transactions entered into, or any other services provided, for the portfolio of the scheme. | ||
| 6 | Movement in value of portfolio A statement of the difference between the value of the portfolio at the closing date and its value at the starting date of the account period, having regard at least, during the account period, to the following: |
||
| (a) | the aggregate of assets received from participants of the scheme and added to the portfolio of the scheme; | ||
| (b) | the aggregate of the value of assets transferred, or of amounts paid, to the scheme; | ||
| (c) | the aggregate income received on behalf of the scheme in respect of the portfolio; and | ||
| (d) | the aggregate of realised and unrealised profits or gains and losses attributable to the assets comprised in the portfolio of the scheme. | ||
| Notes: For the purposes of Item 1, where the scheme is a property enterprise trust, it will be sufficient for the periodic statement to disclose the number of properties held in successive valuation bands where this is appropriate to the size and composition of the scheme, rather than the value of each asset in the portfolio. The valuation bands of over £10m, £5-£10m, £2.5-£5m, £1-£2.5m and under £1m would be appropriate, unless an operator could show that different bands were justifiable in the circumstances. The statement to be provided under Item 6 is not intended to be an indicator of the performance of the portfolio of the scheme. An operator may wish to distinguish capital and income, and thereby provide more information than referred to in this table. If the statement includes some measure of performance, the basis of measurement should be stated. |
|||
- 01/11/2007
COBS 18.5.18
See Notes
This table belongs to COBS 18.5.15 E.
| Contents of a periodic statement in respect of contingent liability investments | ||
| (1) | Changes in value The aggregate of money transferred into and out of the portfolio of the scheme during the account period. |
|
| (2) | Open positions In relation to each open position in the portfolio of the scheme at the end of the account period, the unrealised profit or loss to the portfolio of the scheme (before deducting or adding any commission which would be payable on closing out). |
|
| (3) | Closed positions In relation to each transaction effected during the account period to close out a position of the scheme, the resulting profit or loss to the portfolio of the scheme after deducting or adding any commission. (Instead of the specific detail required by Items 2 or 3, the statement may show the net profit or loss in respect of the overall position of the scheme in each contract) |
|
| (4) | Aggregate of contents The aggregate of each of the following in, or relating to, the portfolio of the scheme at the close of business on the valuation date: |
|
| (a) | cash; | |
| (b) | collateral value; | |
| (c) | management fees; and | |
| (d) | commissions attributable to transactions during the period or a statement that this information has been separately disclosed in writing on earlier statements or confirmations to the participant. | |
| (5) | Option account valuations In respect of each open option comprising the portfolio of the scheme on the valuation date: |
|
| (a) | the share, future, index or other investment or asset involved; | |
| (b) | (unless the valuation statement follows the statement for the period in which the option was opened) the trade price and date for the opening transaction; | |
| (c) | the market price of the contract; and | |
| (d) | the exercise price of the contract. | |
| Options account valuations may show an average trade price and market price in respect of an option series where a number of contracts within the same series have been purchased on behalf of the scheme. | ||
- 01/11/2007
COBS 18.6
Lloyd's
- 01/11/2007
Application
COBS 18.6.1
See Notes
- 01/11/2007
COBS rules that apply to Lloyd's market activities
COBS 18.6.2
See Notes
- 01/11/2007
COBS 18.6.3
See Notes
- 01/11/2007
Definitions and modifications
COBS 18.6.4
See Notes
When a firm is carrying on Lloyd's market activities, any reference in COBS to the term:
- (1) designated investment is to be taken to include the following specified investments:
- (a) the underwriting capacity of a Lloyd's syndicate;
- (b) membership of a Lloyd's syndicate; and
- (c) rights to or interests in the specified investments in (a) or (b);
- (2) designated investment business is to be taken to include the following regulated activities:
- 01/11/2007
The Principles and Lloyd's market activities
COBS 18.6.5
See Notes
- 01/11/2007
COBS 18.7
Depositaries
- 01/11/2007
COBS 18.7.1
See Notes
| COBS | Description |
| 2.1 | Acting honestly, fairly and professionally |
| 2.3 | Inducements, except COBS 2.3.1 R (2)(b) and COBS 2.3.2 R |
| 4 | Communication to clients including financial promotions, but only in relation to communicating or approving a financial promotion |
| 11.7 | Personal account dealing |
- 01/11/2007
COBS 18.8
OPS firms - non scope business
- 01/11/2007
COBS 18.8.1
See Notes
COBS applies to an OPS firm when it carries on business which is not MiFID or equivalent third country business, with the following modifications:
- (1) references to client are to be taken to be references to the OPS or welfare trust, as the case may be, in respect of which the OPS firm is acting or intends to act, and with or for the benefit of whom the relevant business is to be carried on;
- (2) if an OPS firm is required by any COBS rule to provide information to, or obtain consent from, a client, that firm must ensure that the information is provided to, or consent obtained from, each of the trustees of the OPS or welfare trust for whom that firm is acting; and
- (3) COBS is modified by the addition of the rules in the table below:
| Additional COBS rules applicable to an OPS firm | |
| COBS | Description |
| 16.2.6R (4) | If an OPS firm carries on OPS activity for an OPS trustee who is a professional client and who is habitually resident in the United Kingdom, it may rely upon the exceptions in COBS 16.2.1 R (2) or COBS 16.2.6 R (1) only if it provides a periodic statement to the professional client containing the information required by COBS 18.8.2R |
- 01/11/2007
COBS 18.8.2
See Notes
| Information to be included in a periodic statement provided by an OPS firm conducting OPS activity | |
| (1) | Investment objectives |
| A statement of any investment objectives governing the mandate of the portfolio of the occupational pension scheme as at the closing and starting date of the periodic statement. | |
| (2) | Details of any asset loaned or charged |
| (a) a summary of any investments that were, at the closing date, lent to a third party and any investments that were at that date charged to secure borrowings made on behalf of the portfolio; and (b) the aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during that period and a comparison with the previous period. |
|
| (3) | Transactions and changes in composition |
| (a) a summary of the transactions entered into for the portfolio during the period and a comparison with the previous period; (b) the aggregate of money and a summary of all investments transferred into and out of the portfolio during the period; and (c) the aggregate of any interest payments, dividends and other benefits received by the firm for the portfolio during that period and a comparison with the previous period. |
|
| (4) | Charges and remuneration |
| If not previously advised in writing, a statement for the period of account: (a) of the aggregate charges of the firm and its associates; and (b) of any remuneration received by the firm or its associates or both from a third party in respect of the transactions entered into, or any other services provided, for the portfolio. |
|
| (5) | Movement in value of portfolio |
| A statement of the difference between the value of the portfolio at the closing date of the period of account and its value at the starting date, having regard, during the period of account, to: (a) the aggregate of assets received from the occupational pension scheme and added to the portfolio; (b) the aggregate of the value of assets transferred, or of amounts paid, to the client; (c) the aggregate income received on behalf of the client in respect of the portfolio; and (d) the aggregate of realised and unrealised profits or gains and losses attributable to the assets comprised in the portfolio. |
|
- 01/11/2007
COBS 18.8.3
See Notes
- 01/11/2007
COBS 18.9
ICVCs
- 01/11/2007
COBS 18.9.1
See Notes
- 01/11/2007
COBS 18.9.2
See Notes
- 01/11/2007
COBS 18.10
UCITS qualifiers and service companies
- 01/11/2007
COBS 18.10.1
See Notes
| COBS | Description |
| 4 | Communications to clients, but only in relation to communicating or approving a financial promotion |
| 5.2 | E-Commerce |
| 12.4 | Investment Research recommendations: required disclosures |
- 01/11/2007
COBS 18.11
Authorised professional firms
- 01/11/2007
COBS 18.11.1
See Notes
- 01/11/2007
COBS 18.11.2
See Notes
COBS does not apply to an authorised professional firm with respect to its non-mainstream regulated activities, except that:
- (1) the fair, clear and not misleading rule applies;
- (2) the financial promotion rules apply as modified below;
- (3) COBS 7 (Insurance mediation) applies but only if the designated professional body of the firm does not have rules approved by the FSA under section 332(5) of the Act that implement articles 12 and 13 of the Insurance Mediation Directive and that apply to the firm;
- (4) COBS 8.1.3 R (Client agreements) applies, except for the requirement to provide information on conflicts of interest; and
- (5) COBS 5.2 (E-commerce) applies.
- 05/11/2007
COBS 18.11.3
See Notes
The financial promotion rules do not apply to an authorised professional firm in relation to the communication of a financial promotion if:
- (1) the firm's main business is the practice of its profession (see IPRU(INV) 2.1.2R(3));
- (2) the financial promotion is made for the purposes of and incidental to the promotion or provision by the firm of its professional services or its non-mainstream regulated activities; and
- (3) the financial promotion is not communicated on behalf of another person who would not be able lawfully to communicate the financial promotion if he were acting in the course of business;
- 01/11/2007
COBS 18.11.4
See Notes
- 01/11/2007
COBS 19
Pensions supplementary provisions
COBS 19.1
Pension transfers and opt-outs
- 01/11/2007
Preparing and providing a transfer analysis
COBS 19.1.1
See Notes
- 01/11/2007
COBS 19.1.2
See Notes
A firm must:
- (1) compare the benefits likely (on reasonable assumptions) to be paid under a defined benefits pension scheme with the benefits afforded by a personal pension scheme or stakeholder pension scheme, before it advises a retail client to transfer out of a defined benefits pension scheme;
- (2) ensure that that comparison includes enough information for the client to be able to make an informed decision;
- (3) give the client a copy of the comparison, drawing the client's attention to the factors that do and do not support the firm's advice, no later than when the key features document is provided; and
- (4) take reasonable steps to ensure that the client understands the firm's comparison and its advice.
- 01/11/2007
COBS 19.1.3
See Notes
In particular, the comparison should:
- (1) take into account all of the retail client's relevant circumstances;
- (2) have regard to the benefits and options available under the ceding scheme and the effect of replacing them with the benefits and options under the proposed scheme; and
- (3) explain the assumptions on which it is based and the rates of return that would have to be achieved to replicate the benefits being given up.
- 01/11/2007
COBS 19.1.4
See Notes
When a firm compares the benefits likely to be paid under a defined benefits pension scheme with the benefits afforded by a personal pension scheme or stakeholder pension scheme (COBS 19.1.2R (1)), it must:
- (1) assume that:
| (a) | the annuity interest rate is the intermediate rate of return appropriate for a level or fixed rate of increase annuity in (COBS 13 Annex 2 3.1R(6)) or the rate for annuities in payment (if less) | |
| (b) | the retail prices index is | 2.5% |
| (c) | the average earnings index and the rate for section 21 orders is | 4.0% |
| (d) | the pre-retirement limited price indexation revaluation is | 2.5% |
| (e) | the post-retirement limited price increases at | 2.5% |
| (f) | the index linked pensions rate is the intermediate rate of return in COBS 13 Annex 2 3.1 R (6) for annuities linked to the retail prices index; |
- or use more cautious assumptions;
- (2) calculate the interest rate in deferment; and
- (3) have regard to benefits which commence at difference times.
- 01/11/2007
COBS 19.1.5
See Notes
- 01/11/2007
Suitability
COBS 19.1.6
See Notes
- 01/11/2007
COBS 19.1.7
See Notes
- 01/11/2007
COBS 19.1.8
See Notes
When a firm prepares a suitability report it should include:
- (1) a summary of the advantages and disadvantages of its personal recommendation;
- (2) an analysis of the financial implications (if the recommendation is to opt-out); and
- (3) a summary of any other material information.
- 01/11/2007
COBS 19.1.9
See Notes
- 01/11/2007
COBS 19.2
Personal pensions, FSAVCs and AVCs
- 01/11/2007
Financial promotions
COBS 19.2.1
See Notes
- 01/11/2007
Suitability
COBS 19.2.2
See Notes
When a firm prepares a suitability report it must:
- (1) (in the case of a personal pension scheme), explain why it considers the personal pension scheme to be at least as suitable as a stakeholder pension scheme; and
- (2) (in the case of an FSAVC), explain why it considers the FSAVC to be at least as suitable as any stakeholder pension scheme, AVC or facility to make additional contributions to an occupational pension scheme which is available to the retail client.
- 01/11/2007
COBS 19.2.3
See Notes
When a firm promotes a personal pension scheme, including a group personal pension scheme, to a group of employees it must:
- (1) be satisfied on reasonable grounds that the scheme is likely to be at least as suitable for the majority of the employees as a stakeholder pension scheme; and
- (2) record why it thinks the promotion is justified.
- 01/11/2007
COBS 19.3
Product disclosure to members of occupational pension schemes
- 01/11/2007
COBS 19.3.1
See Notes
- (1) When a firm sells, personally recommends or arranges the payment of an AVC contribution by a member of an occupational pension scheme to be secured by a packaged product purchased by the scheme trustees, it must give the trustees sufficient information to pass to the relevant member for that member to be able to make informed comparisons between the AVC and any alternative personal pension schemes and stakeholder pension schemes available.
- (2) This rule applies to an AVC where members' benefits are linked to the earmarked segments of a life policy or scheme, but it does not apply to an AVC where the trustees make pooled investments and have their own arrangements for allocating investment returns to determine members' AVC benefits.
- 01/11/2007
COBS 19.4
Open market options
- 01/11/2007
COBS 19.4.1
See Notes
In this section:
- (1) 'intended retirement date' means:
- (a) the date (according to the most recent recorded information available to the provider) when the scheme member intends to retire, or to bring the benefits in the scheme into payment, whichever is the earlier; or
- (b) if there is no such date, the scheme member's state pension age;
- (2) 'open market option' means the option to use the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract to purchase an annuity on the open market; and
- (3) 'open market option statement 'means:
- (a) the FSA's "Your pension: it's time to choose" fact sheet, together with a written summary of the retail client's open market option, which is sufficient for the client to be able to make an informed decision about whether to exercise, or to decline to exercise, an open market option; or
- (b) a written statement that gives materially the same information.
- 01/11/2007
When to send open market options statement and six-week reminder
COBS 19.4.2
See Notes
- (1) If a retail client asks a firm for a retirement quotation more than four months before the client's intended retirement date, the firm must give the client an open market option statement with or as part of its reply, unless the firm has given the client such a statement in the last 12 months.
- (2) If a firm does not receive such a request, it must provide a retail client with an open market option statement between four and six months before the client's intended retirement date.
- 01/11/2007
COBS 19.4.3
See Notes
- (1) remind the retail client about the open market option statement; and
- (2) tell the client what sum of money will be available to purchase an annuity on the open market;
- 01/11/2007
COBS 19.4.4
See Notes
If a retail client with an open market option tells a firm that he is considering, or has decided:
- 01/11/2007
COBS 20
With-profits
COBS 20.1
Application
- 01/11/2007
COBS 20.1.1
See Notes
- 01/11/2007
COBS 20.1.2
See Notes
- (1) The section on the process for reattribution (COBS 20.2.42 R to COBS 20.2.52 G):
- (a) applies to a firm that is proposing to make a reattribution of its inherited estate;
- (b) but not if, and to the extent that, it would require the firm to breach, or would prevent the firm from complying with, an order made by a court of competent jurisdiction.
- (2) If a firm proposes to seek an order from a court of competent jurisdiction that would allow or require it to act in a way that is contrary to the rules on reattribution (COBS 20.2.42 R to COBS 20.2.52 G) (through, or because of, the exception in (1)(b)), the firm must:
- 01/11/2007
COBS 20.1.3
See Notes
For an EEA insurer:
- (1) the rules and guidance on treating with-profits policyholders fairly (COBS 20.2.1 G to COBS 20.2.41 G and COBS 20.2.53 R to COBS 20.2.60 G) apply only in so far as responsibility for the matter in question has not been reserved to the firm's Home State regulator by a European Community instrument;
- (2) COBS 20.3 (Principles and Practices of Financial Management) does not apply;
- (3) the rule on providing information to with-profits policyholders who are habitually resident in the United Kingdom (COBS 20.4.4 R) and the rule on production and provision of a CFPPFM (COBS 20.4.5 R) apply, but the rest of COBS 20.4 (Communications with with-profits policyholders) does not; and
- (4) the rule on production and provision of a CFPPFM (COBS 20.4.5 R) applies as if a reference to a firm was a reference to an EEA insurer in relation to any of its with-profits policyholders who are habitually resident in the United Kingdom.
- 01/11/2007
COBS 20.1.4
See Notes
The following do not apply to a non-directive friendly society:
- 01/11/2007
COBS 20.1.5
See Notes
- 01/11/2007
COBS 20.2
Treating with-profits policyholders fairly
- 01/11/2007
Introduction
COBS 20.2.1
See Notes
- 01/11/2007
COBS 20.2.2
See Notes
- 01/11/2007
Amounts payable under with-profits policies
COBS 20.2.3
See Notes
- 01/11/2007
Amounts payable under with-profits policies: Maturity payments
COBS 20.2.4
See Notes
- 01/11/2007
COBS 20.2.5
See Notes
- (1) Unless a firm cannot reasonably compare a maturity payment with a calculated asset share, it must:
- (a) set a target range for the maturity payments that it will make on:
- (i) all of its with-profits policies; or
- (ii) each group of its with-profits policies;
- (b) ensure that each target range:
- (i) is expressed as a percentage of unsmoothed asset share; and
- (ii) includes 100% of unsmoothed asset share; and
- (c) manage its with-profits business, and the business of each with-profit fund, with the aim of making on each with-profit policy a maturity payment that falls within the relevant target range.
- (2) Unsmoothed asset share means:
- (a) the unsmoothed asset share of the relevant with-profits policy; or
- (b) an estimate of the unsmoothed asset share of the relevant with-profits policy derived from the unsmoothed asset share of one or more specimen with-profits policies, which a firm has selected to represent a group, or all, of the with-profits policies effected in the same with-profits fund.
- (3) A firm must calculate unsmoothed asset share by:
- (a) applying the methods in INSPRU 1.3.119 R to INSPRU 1.3.123 R;
- (b) including any amounts that have been added to the policy as the result of a distribution from an inherited estate; and
- (c) subject to (d), and where the terms of the policy so provide, adding or subtracting an amount that reflects the experience of the insurance business in the relevant with-profits fund; but
- (d) if a with-profits fund has suffered adverse experience, which results from a firm's failure to comply with the rules and guidance on treating with-profits policyholders fairly (COBS 20.2.1 G to COBS 20.2.41 G and COBS 20.2.53 R to COBS 20.2.60 G), that adverse experience may only be taken into account if, and to the extent that, in the reasonable opinion of the firm's governing body, the amount referred to in (c) cannot be met from:
- (i) the firm's inherited estate (if any); or
- (ii) any assets attributable to shareholders, whether or not they are held in the relevant with-profits fund.
- 01/11/2007
COBS 20.2.6
See Notes
- 01/11/2007
COBS 20.2.7
See Notes
- 01/11/2007
COBS 20.2.8
See Notes
- 01/11/2007
COBS 20.2.9
See Notes
- 01/11/2007
COBS 20.2.10
See Notes
- 01/11/2007
Amounts payable under with-profits policies: Surrender payments
COBS 20.2.11
See Notes
- 01/11/2007
COBS 20.2.12
See Notes
- 01/11/2007
COBS 20.2.13
See Notes
- 01/11/2007
COBS 20.2.14
See Notes
Amounts that might be deducted include:
- (1) the firm's unrecovered costs, including any financing costs incurred in effecting or carrying out the surrendered with-profits policy to the date of surrender, including the costs that might have been recovered if the policy had remained in force;
- (2) costs that would fall on the with-profits fund, if the surrender value is calculated by reference to an assumed market value of assets which exceeds the true market value of those assets;
- (3) the firm's costs incurred in administering the surrender; and
- (4) a fair contribution towards the cost of any contractual benefits due on the whole, or an appropriate part, of the continuing policies in the with-profits fund which would otherwise result in higher costs falling on the continuing with-profits policies.
- 01/11/2007
COBS 20.2.15
See Notes
- 01/11/2007
COBS 20.2.16
See Notes
A firm must not make a market value reduction to the face value of the units of an accumulating with-profits policy unless:
- (1) the market value of the with-profits assets in the relevant with-profits fund is, or is expected to be, significantly less than the assumed value of the assets on which the face value of the units of the policy has been based; or
- (2) there has been, or there is expected to be, a high volume of surrenders, relative to the liquidity of the relevant with-profits fund; and the market value reduction is no greater than is necessary to reflect the impact of (1) or (2) on the relevant surrender payment.
- 01/11/2007
COBS 20.2.17
See Notes
A firm must:
- (1) not make a distribution from a with-profits fund, unless the whole of the cost of that distribution can be met without eliminating the regulatory surplus in that with-profits fund;
- (2) ensure that the amount distributed to policyholders from a with-profits fund is not less than the required percentage of the total amount distributed; and
- (3) if it adjusts the amounts distributed to policyholders, apply a proportionate adjustment to amounts distributed to shareholders, so that the distribution to policyholders will not be less than the required percentage.
- 01/11/2007
COBS 20.2.18
See Notes
- 01/11/2007
COBS 20.2.19
See Notes
- 01/11/2007
COBS 20.2.20
See Notes
If, on a distribution, a firm incurs a tax liability on a transfer to shareholders, it must not attribute that tax liability to a with-profits fund, unless:
- (1) the firm can show that attributing the tax liability to that with-profits fund is consistent with its established practice;
- (2) that established practice is explained in the firm's PPFM; and
- (3) that liability is not charged to asset shares.
- 01/11/2007
Requirement relating to distribution of an excess surplus
COBS 20.2.21
See Notes
- 01/11/2007
COBS 20.2.22
See Notes
- (1) If a with-profits fund has an excess surplus, and to retain that surplus would be a breach of Principle 6 (Customers' interests), the firm should:
- (a) make a distribution from that with-profits fund; or
- (b) carry out a reattribution.
- (2) Compliance with (1) may be relied on as tending to establish compliance with Principle 6 (Customers' interests).
- (3) Contravention of (1) may be relied on as tending to establish a contravention of Principle 6 (Customers' interests).
- 01/11/2007
Charges to a with-profits fund
COBS 20.2.23
See Notes
- 01/11/2007
COBS 20.2.24
See Notes
- 01/11/2007
COBS 20.2.25
See Notes
A firm may pay compensation or redress due to a policyholder, or former policyholder:
- (1) from assets attributable to shareholders, whether or not they are held within a long-term insurance fund; or
- (2) from its inherited estate (if any); or
- (3) from assets that would otherwise be attributable to asset shares, if, in the reasonable opinion of the firm's governing body, that compensation or redress cannot be paid from the assets in (1) or (2), or from any other source.
- 01/11/2007
COBS 20.2.26
See Notes
- 01/11/2007
Tax charge to a with-profits fund
COBS 20.2.27
See Notes
- 01/11/2007
New business
COBS 20.2.28
See Notes
- 01/11/2007
COBS 20.2.29
See Notes
In some circumstances, it may be difficult or impossible for a firm to mitigate the risk of a material adverse effect on its existing, or new, with-profits policyholders, unless it establishes a new bonus series or with-profits fund. Circumstances that might cause a firm to establish a new bonus series or with-profits fund include:
- (1) where the firm has a high level of guarantees or options in its existing with-profits policies, which might place an excessive burden on new with-profits policies, or vice versa; and
- (2) where the potential risks are likely to be so great that a single with-profits fund cannot provide adequately for the interests of new and existing policyholders, even after allowing for any beneficial effects of diversification. Such potential risks are likely to arise from significant differences in the terms and conditions of the new and existing with-profits policies, including the basis on which charges are levied and reviewed.
- 01/11/2007
COBS 20.2.30
See Notes
- 01/11/2007
COBS 20.2.31
See Notes
- 01/11/2007
Relationship of a with-profits fund with the firm and any connected persons
COBS 20.2.32
See Notes
A firm carrying on with-profits business must not:
- (1) make a loan to a connected person using assets in a with-profits fund; or
- (2) give a guarantee to, or for the benefit of, a connected person, where the guarantee will be backed using assets in a with-profits fund;
- unless that loan or guarantee:
- (3) will be on commercial terms;
- (4) will, in the reasonable opinion of the firm's senior management, be beneficial to the with-profits policyholders in the relevant with-profits fund; and
- (5) will not, in the reasonable opinion of the firm's senior management, expose those policyholders to undue credit or group risk.
- 01/11/2007
Contingent loans and other forms of support for the with-profits fund
COBS 20.2.33
See Notes
- (1) If a firm, or a connected person, provides support to a with-profits fund (for example, by a contingent loan), no reliance should be placed on that support when the firm assesses the with-profits fund's financial position unless there are clear and unambiguous criteria governing any repayment obligations to the support provider.
- (2) The degree of reliance placed on that support should depend on the subordination of the support to the fair treatment of with-profits policyholders and clarification of what fair treatment means in various circumstances. For a realistic basis life firm this would normally be evidenced by the liability for such support being capable, under stress, of a progressively lower valuation in the future policy-related liabilities.
- 01/11/2007
COBS 20.2.34
See Notes
- 01/11/2007
Other guidance on the conduct of with-profit business
COBS 20.2.35
See Notes
When a firm determines its investment strategy, and the acceptable level of risk within that strategy, it should take into account:
- (1) the extent of the guarantee in its with-profits policies;
- (2) any representation that it has made to its with-profits policyholders;
- (3) its established practice; and
- (4) the amount of capital support available.
- 01/11/2007
COBS 20.2.36
See Notes
- 01/11/2007
COBS 20.2.37
See Notes
- 01/11/2007
COBS 20.2.38
See Notes
- 01/11/2007
Major changes in with-profits funds
COBS 20.2.39
See Notes
- 01/11/2007
COBS 20.2.40
See Notes
- 01/11/2007
COBS 20.2.41
See Notes
Examples of material transactions include:
- (1) a significant bulk outwards reinsurance contract;
- (2) inwards reinsurance of with-profits business from another insurance undertaking;
- (3) a financial engineering transaction that would materially change the profile of any surplus expected to emerge on the with-profits fund's existing insurance business; and
- (4) a significant restructuring of the with-profits fund, especially if it involves the creation of new sub-funds.
- 01/11/2007
Process for reattribution of inherited estates: Policyholder advocate: appointment and role
COBS 20.2.42
See Notes
A firm that is seeking to make a reattribution of its inherited estate must:
- (1) identify at the earliest appropriate point a policyholder advocate, who is free from any conflicts of interest that may be, or may appear to be, detrimental to the interests of policyholders, to negotiate with the firm on behalf of relevant with-profits policyholders;
- (2) seek the approval of the FSA for the appointment of the policyholder advocate as soon as he is identified, or appoint a policyholder advocate nominated by the FSA if its approval is not granted; and
- (3) involve the policyholder advocate designate at the earliest possible opportunity to enable him to participate effectively in the negotiations about the proposals for the reattribution.
- 01/11/2007
COBS 20.2.43
See Notes
- 01/11/2007
COBS 20.2.44
See Notes
The precise role of the policyholder advocate in any particular case will depend on the nature of the firm and the reattribution proposed. A firm will need to discuss with the FSA the precise role of the policyholder advocate in a particular case (COBS 20.2.45 R). However, the role of the policyholder advocate should include:
- (1) negotiating with the firm, on behalf of the relevant with-profits policyholders, the benefits to be offered to them in exchange for the rights or interests they will be asked to give up;
- (2) commenting to with-profits policyholders, on:
- (a) the methodology used for the allocation of benefits amongst the relevant (or groups of) with-profits policyholders and the form of those benefits;
- (b) the criteria used for determining the eligibility of the various with-profits policyholders;
- (c) the terms and conditions of the proposals (to the extent that they materially affect the benefits to be offered, or the bonuses that may be added to with-profits policies); and
- (d) the views expressed by the independent expert or the reattribution expert (as the case may be), and the firm's with-profits actuary on the allocation of any benefits amongst the relevant with-profits policyholders; and
- (3) telling with-profits policyholders, or each group of with-profits policyholders, with reasons, whether the firm's proposals are in their interests.
- 01/11/2007
Process for reattribution of inherited estates: Policyholder advocate: terms of appointment
COBS 20.2.45
See Notes
A firm must:
- (1) notify the FSA of the terms on which it proposes to appoint a policyholder advocate (whether or not the candidate was nominated by the FSA); and
- (2) ensure that the terms of appointment for the policyholder advocate:
- (a) stress the independent nature of the policyholder advocate's appointment and function, and are consistent with it;
- (b) define the relationship of the policyholder advocate to the firm and its policyholders;
- (c) set out arrangements for communications between the policyholder advocate and policyholders;
- (d) make provision for the resolution of any disputes between the firm and the policyholder advocate;
- (e) specify when and how the policyholder advocate's appointment may be terminated; and
- (f) allow the policyholder advocate to communicate freely and in confidence with the FSA.
- 01/11/2007
COBS 20.2.46
See Notes
- 01/11/2007
Process for reattribution of inherited estates: Reattribution expert
COBS 20.2.47
See Notes
Where a firm is not otherwise required to appoint an independent expert, it must:
- (1) appoint a reattribution expert to undertake an objective assessment of its reattribution proposals, who must be:
- (a) nominated or approved by the FSA before he is appointed; and
- (b) free from any conflicts of interest that may, or may appear to, undermine his independence or the quality of his report;
- (2) ensure that the reattribution expert's terms of appointment allow him to communicate freely and in confidence with the FSA; and
- (3) require the reattribution expert to prepare a report which must be available to the FSA, the policyholder advocate and the court (if it is relevant to any court proceedings).
- 01/11/2007
COBS 20.2.48
See Notes
A reattribution expert's report should comply with the applicable rules on expert evidence. The scope and content of the report should be substantially similar to that of the report required of an independent expert under SUP 18.2 (Insurance business transfers), as if (where appropriate) a reference to:
- (1) the 'scheme report' was a reference to the 'reattribution expert's report';
- (2) the 'independent expert' was a reference to the 'reattribution expert'; and
- (3) the 'scheme' was a reference to the proposal for a 'reattribution'.
- 01/11/2007
Process for reattribution of inherited estates: Information to policyholders
COBS 20.2.49
See Notes
A firm must ensure that every policyholder that may be affected by the proposed reattribution is sent appropriate and timely information about:
- (1) the reattribution process, including the role of the policyholder advocate, the independent expert or reattribution expert, as the case may be, and other individuals appointed to perform particular functions;
- (2) the reattribution proposals and how they affect the relevant policyholders, including an explanation of any benefits they are likely to receive and the rights and interests that they are likely to be asked to give up;
- (3) the policyholder advocate's views on the reattribution proposals and any benefits the relevant policyholders are likely to receive and the rights and interests that they are likely to be asked to give up; and
- (4) the outcome of the negotiations between the firm and the policyholder advocate about the benefits that will be offered to relevant with-profits policyholders, in exchange for the rights and interests that they will be asked to give up.
- 01/11/2007
COBS 20.2.50
See Notes
- 01/11/2007
Process for reattribution of inherited estates: Consent of policyholders
COBS 20.2.51
See Notes
A firm must give relevant with-profits policyholders the option to:
- (1) individually accept or reject the final proposals for the reattribution; or
- (2) (if the legal process to be followed allows the majority of policyholders to bind the minority) vote on whether the firm should go ahead with those proposals.
- 01/11/2007
Process for reattribution of inherited estates: Costs
COBS 20.2.52
See Notes
- (1) Reattribution and insurance business transfer costs (excluding policyholder advocate costs) should be met from shareholder funds. A firm may present alternative arrangements if it can show good reasons for doing so.
- (2) Shareholders should pay a reasonable proportion of the policyholder advocate's costs.
- (3) If a reattribution proposal is not successful, the FSA would expect the costs of the policyholder advocate to be met by the person initiating the proposal. That will usually be the shareholders of the firm.
- 01/11/2007
Ceasing to effect new contracts of insurance in a with-profits fund
COBS 20.2.53
See Notes
A firm must:
- (1) inform the FSA and its with-profits policyholders within 28 days; and
- (2) submit a run-off plan to the FSA as soon as reasonably practicable and, in any event, within three months;
- 01/11/2007
COBS 20.2.54
See Notes
A firm will be taken to have ceased to effect new contracts of insurance in a with-profits fund:
- (1) when any decision by the governing body to cease to effect new contracts of insurance takes effect; or
- (2) where no such decision is made, when the firm is no longer:
- (a) actively seeking to effect new contracts of insurance in that fund; or
- (b) effecting new contracts of insurance in that fund, except by increment.
- 01/11/2007
COBS 20.2.55
See Notes
A firm must contact the FSA to discuss whether it has, or should be taken to have, ceased to effect new contracts of insurance if:
- (1) it is no longer effecting a material volume of new with-profits policies in a particular with-profits fund, other than by reinsurance; or
- (2) it cedes by way of reinsurance most of the new with-profits policies which it continues to effect.
- 01/11/2007
COBS 20.2.56
See Notes
The run-off plan required by this section must:
- (1) demonstrate how the firm will ensure a fair distribution of the closed with-profits fund, and its inherited estate (if any); and
- (2) be approved by the firm's governing body.
- 01/11/2007
COBS 20.2.57
See Notes
- 01/11/2007
COBS 20.2.58
See Notes
When a firm tells its with-profits policyholders that it has ceased to effect new contracts of insurance in a with-profits fund, it should also explain:
- (1) why it has done so;
- (2) what changes it has made, or proposes to make, to the fund's investment strategy (if any);
- (3) how closure may affect with-profits policyholders (including any reasonably foreseeable effect on future bonus prospects);
- (4) the options available to with-profits policyholders and an indication of the potential costs associated with the exercise of each of those options; and
- (5) any other material factors that a policyholder may reasonably need to be aware of before deciding how to respond to this information.
- 01/11/2007
COBS 20.2.59
See Notes
A firm may not be able to provide its with-profits policyholders with all of the information described above until it has prepared the run-off plan. In those circumstances, the firm should:
- (1) tell its with-profits policyholders that that is the case;
- (2) explain what is missing and give a time estimate for its supply; and
- (3) provide the missing information as soon as possible, and within the time estimate given.
- 01/11/2007
COBS 20.2.60
See Notes
- (1) If non-profit insurance business is written in a with-profits fund, a firm should take reasonable steps to ensure that the economic value of any future profits expected to emerge on the non-profit insurance business is available for distribution during the lifetime of the with-profits business.
- (2) Where it is agreed by its with-profits policyholders, and subject to meeting the requirements for effecting new contracts of insurance in an existing with-profits fund (COBS 20.2.28 R), a mutual may make alternative arrangements for continuing to carry on non-profit insurance business, and a non-directive friendly society may make alternative arrangements for continuing to carry on non-insurance related business.
- 01/11/2007
COBS 20.3
Principles and Practices of Financial Management
- 01/11/2007
Production of PPFM
COBS 20.3.1
See Notes
- (1) A firm must:
- (a) establish and maintain the PPFM according to which its with-profits business is conducted (or, if appropriate, separate PPFM for each with-profits fund); and
- (b) retain a record of each version of its PPFM for five years.
- (2) A firm's with-profits principles must:
- (a) be enduring statements of the standards it adopts in managing with-profits funds; and
- (b) describe the business model it uses to meet its duties to with-profits policyholders and to respond to longer-term changes in the business and economic environment.
- (3) A firm's with-profits practices must:
- (a) describe how a firm manages its with-profits funds and how it responds to shorter-term changes in the business and economic environment; and
- (b) be sufficiently detailed for a knowledgeable observer to understand the material risks and rewards from effecting or maintaining a with-profits policy with it.
- (4) A firm must not change its PPFM unless, in the reasonable opinion of its governing body, that change is justified to:
- (a) respond to changes in the business or economic environment; or
- (b) protect the interests of policyholders; or
- (c) change the firm's with-profits practices better to achieve its with-profits principles.
- (5) A firm may change its PPFM if that change:
- (a) is necessary to correct an error or omission; or
- (b) would improve clarity or presentation without materially affecting the PPFM's substance; or
- (c) is immaterial.
- 01/11/2007
Governance arrangements for with-profits business
COBS 20.3.2
See Notes
In complying with the rule on systems and controls in relation to compliance, financial crime and money laundering (SYSC 3.2.6 R), a firm should maintain governance arrangements designed to ensure that it complies with, maintains and records any applicable PPFM. These arrangements should:
- (1) be appropriate to the scale and complexity of the firm's with-profits business;
- (2) include the approval of the firm's PPFM by its governing body; and
- (3) involve some independent judgment in assessing compliance with its PPFM and addressing conflicting rights and interests of policyholders and, if applicable, shareholders, which may include but is not confined to:
- (a) establishing a with-profits committee;
- (b) asking an independent person with appropriate skills and experience to report on these matters to the governing body or to any with-profits committee; or
- (c) for small firms, asking one or more non-executive members of the governing body to report to the governing body on these matters.
- 01/11/2007
COBS 20.3.3
See Notes
- 01/11/2007
Scope and content of PPFM
COBS 20.3.4
See Notes
- 01/11/2007
COBS 20.3.5
See Notes
A firm's PPFM must cover any matter that has, or it is reasonably foreseeable may have, a significant impact on the firm's management of with-profits funds, including but not limited to:
- (1) any requirements or constraints that apply as a result of previous dealings, including previous business transfer schemes; and
- (2) the nature and extent of any shareholder commitment to support the with-profits fund.
- 01/11/2007
COBS 20.3.6
See Notes
| Subject | Issues | |||
| (1) | Amount payable under a with-profits policy | (a) | Methods used to guide determination of the amount that is appropriate to pay individual with-profits policyholders, including: | |
| (i) | the aims of the methods and approximations used; | |||
| (ii) | how the current methods, including any relevant historical assumptions used and any systems maintained to deliver results of particular methods, are documented; and | |||
| (iii) | the procedures for changing the current method or any assumptions or parameters relevant to a particular method. | |||
| (b) | Approach to setting bonus rates. | |||
| (c) | Approach to smoothing maturity payments and surrender payments, including: | |||
| (i) | the smoothing policy applied to each type of with-profits policy; | |||
| (ii) | the limits (if any) applied to the total cost of, or excess from, smoothing; and | |||
| (iii) | any limits applied to any changes in the level of maturity payments between one period to another. | |||
| (2) | Investment strategy | Significant aspects of the firm's investment strategy for its with-profits business or, if different, any with-profits fund, including: | ||
| (a) | the degree of matching to be maintained between assets relevant to with-profits business and liabilities to with-profits policyholders and other creditors; | |||
| (b) | the firm's approach to assets of different credit or liquidity quality and different volatility of market values; | |||
| (c) | the presence among the assets relevant to with-profits business of any assets that would not normally be traded because of their importance to the firm, and the justification for holding such assets; and | |||
| (d) | the firm's controls on using new asset or liability instruments and the nature of any approval required before new instruments are used. | |||
| (3) | Business risk | The exposure of the with-profits business to business risks (new and existing), including the firm's: | ||
| (a) | procedures for deciding if the with-profits business may undertake a particular business risk; | |||
| (b) | arrangements for reviewing and setting a limit on the scale of such risks; and | |||
| (c) | procedures for reflecting the profits or losses of such business risks in the amounts payable under with-profits policies. | |||
| (4) | Charges and expenses | (a) | The way in which the firm applies charges and apportions expenses to its with-profits business, including, if material, any interaction with connected firms. | |
| (b) | The cost apportionment principles that will determine which costs are, or may be, charged to a with-profits fund and which costs are, or may be, charged to the other parts of its business of its shareholders. | |||
| (5) | Management of inherited estate | Management of any inherited estate and the uses to which the firm may put that inherited estate. | ||
| (6) | Volumes of new business and arrangements on stopping taking new business | If a firm's with-profits fund is accepting new with-profits business, its practice for review of the limits on the quantity and type of new business and the actions that the firm would take if it ceased to take on new business of any significant amount. | ||
| (7) | Equity between the with-profits fund and any shareholders | The way in which the interests of with-profits policyholders are, or may be, affected by the interests of any shareholders of the firm. | ||
- 01/11/2007
COBS 20.3.7
See Notes
- 01/11/2007
COBS 20.3.8
See Notes
| Reference to PPFM issues (COBS 20.3.6R) | With-profits principles | With-profits practices |
| (1) Amount payable under a with-profits policy | General (a) Circumstances under which any historical assumptions or parameters, relevant to methods used to determine the amount payable, may be changed; |
General (e) For each major class of with-profits policy, methods establishing the main assumptions or parameters that decide the output of methods that determine the amount payable; (f) Degree of approximation allowed when assumptions or parameters are applied across generations of with-profits policyholders or across different types or classes of with-profits policies; (g) Formality with which the methods, parameters or assumptions used are documented; (h) Target range, or target ranges, that have been set for maturity payments; (i) Factors likely to be regarded as relevant to address policyholders' interests or security when determining excess surplus; and Investment return, expenses or charges and tax (j) How investment return, expenses or charges and tax are brought into account and how the impact of those items is determined on the amount payable. In particular: (i) any distinctions made in recognising the investment return from a subset of the total assets of a with-profits fund; (ii) whether expenses are apportioned between all the policies in a with-profits fund or apportioned in some other way;
(iii) the relationship between the liability to tax attributed to a with-profits fund and the tax that the firm imputes to determine the amount payable;
(iv) impact on the amount payable of any attributed liability to tax of a with-profits fund as a result of the firm making a transfer to shareholders; and
(v) how any other items are brought into account.
|
| Bonus rates (b) General aims in setting bonus rates and the constraints to which the firm may be subject in changing economic circumstances; (c) How the range of with-profits policies or generations of with-profits policies over which the firm believes a single bonus rate would be appropriate is determined and the circumstances under which it believes a new bonus series would be necessary; and |
Bonus rates (k) Current approach to setting bonus rates, including the weight given to recent economic experience. For final bonus rates, the description should include any distinctions made between with-profits policies that remain in force until contractual dates, or dates on which no market value reduction applies (for example, maturity or retirement dates) and policies that are surrendered or transferred at other dates; (l) Frequency at which bonus rates are re-set or expected to be re-set and the circumstances under which changes in the economic environment would cause the time between re-setting to change; (m) Maximum amount by which annual bonuses would alter if annual bonus rates were reset; (n) Approach to setting any interim bonus rates before the next declaration of annual bonus rates; (o) Relationship or interaction between final bonus rates and any market value reductions, if both can apply at the same time; (p) How final bonus rates influence the value of with-profits policies that have formulaic surrender or transfer bases (for example, older conventional policies rather than unitised policies); and |
|
| Smoothing (d) Statement as to whether smoothing is intended to be neutral over time. |
Smoothing |
|
| (2) Investment strategy | (a) How the types, classes or mix of assets are determined; and (b) Strategy in respect of derivatives and other instruments. |
(c) Whether and to what extent there is hypothecation of assets; (d) Period between formal reviews of investment strategy; (e) Approach to investment in different asset classes, and assets of different credit or liquidity quality, including assets not normally traded; and (f) Details of any external support available to the with-profits fund and how this affects the investment strategy. |
| (3) Business risk | (a) Where a firm explicitly excludes business risk from a class of with-profits policies but there are residual risks, clarification where these risks such as guarantee and smoothing costs are borne; and (b) Define where compensation costs from a business risk would be borne. |
(c) Current limits which apply to the taking on of business risk; and (d) Whether and to what extent particular generations of with-profits policyholders or classes of with-profits policies bear or might bear particular business risks, including for example, crystallised or contingent guarantees to other classes of policyholders or whether the out-turn from all business risk is pooled across all with-profits policies. |
| (4) Charges and expenses | (a) Factors that would drive any change to the basis on which the firm applies charges to or apportions its actual expenses amongst with-profits policies, or exercises any discretion to apply charges to particular with-profits policies. | (b) Charges currently applied and the expenses currently apportioned to major classes of with-profits policies; (c) Relationship between the firm's actual charges and expenses, as applied to determine the amounts payable under with-profits policies, and the charges and expenses borne by the with-profits fund; (d) Circumstances under which expenses will be charged to the with-profits fund at an amount other than cost, and the reasons why; and (e) Interval for reviewing any arrangements for out-sourced services, including those provided by connected parties, giving a broad indication of the terms for termination. |
| (5) Management of inherited estate | (a) Preferred size or scale of inherited estate and implications for the values of the with profits policies; and (b) Any existing division of the inherited estate between with-profits funds; and (c) Any constraints on the freedom to deal with the inherited estate as a result of previous dealings. |
(d) How the inherited estate is used, for example, in meeting costs; (e) Whether the investment strategy for the inherited estate differs from the rest of the with-profits fund; and (f) Any current guidelines in place as to the size or scale of the inherited estate or as to how and over what time period the inherited estate would be managed, if it becomes too large or too small. |
| (6) Equity between the with-profits fund and any shareholders | (a) Arrangements for, and any changes to, profit sharing between shareholders and with-profits policyholders. | (b) Current basis on which profit between with-profits policyholders and shareholders is divided; and (c) Whether the pricing of any policies being written, and particular policies open to new business, appear to be significantly and systematically reducing the inherited estate if the shareholder transfer is taken into account. |
- 01/11/2007
COBS 20.4
Communications with with-profits policyholders
- 01/11/2007
Provision and publication of PPFM
COBS 20.4.1
See Notes
A firm must:
- (1) on request, provide its PPFM, or the PPFM applicable to specified with-profits funds:
- (a) free of charge to its with-profits policyholders; or
- (b) for a reasonable charge to any person who is not its with-profits policyholder; and
- (2) if the firm publishes its PPFM on its website, prominently signpost its location there.
- 01/11/2007
Notification of changes
COBS 20.4.2
See Notes
A firm must send its with-profits policyholders who are affected by any change in its PPFM, written notice, setting out any:
- (1) proposed changes to the with-profits principles, three months in advance of the effective date; and
- (2) changes to the with-profits practices, within a reasonable time.
- 01/11/2007
COBS 20.4.3
See Notes
- 01/11/2007
Requirements on EEA insurers
COBS 20.4.4
See Notes
In relation to any with-profits policyholder who is habitually resident in the United Kingdom, an EEA insurer must:
- (1) on request, provide the information necessary to enable that policyholder properly to understand the insurer's commitment under the policy;
- (2) ensure that the information provided is not narrower in scope or less detailed in content than the equivalent PPFM; and
- (3) send the policyholder who is affected by any information being changed written notice, setting out:
- (a) any proposed changes to information that is equivalent to the with-profits principles, three months in advance of the effective date; and
- (b) any changes to information that is equivalent to the with-profits practices, within a reasonable time.
- 01/11/2007
Consumer-friendly PPFM
COBS 20.4.5
See Notes
A firm must:
- (1) produce a CFPPFM describing the most important information set out under each of the headings in its PPFM and keep it up to date as the PPFM changes over time;
- (2) express its CFPPFM in clear and plain language that can be easily understood by a with-profits policyholder, or potential with-profits policyholder who does not possess any specialist or technical knowledge;
- (3) provide its CFPPFM free of charge with any:
- (a) written notice sent to with-profits policyholders on proposed changes to its with-profits principles (where the firm must provide the version of the CFPPFM in use before the changes if this has not already been provided);
- (b) annual statements sent to its with-profits policyholders (unless there has been no material change in the CFPPFM since it was last supplied); and
- (c) key features document for a with-profits policy; and
- (4) make its CFPPFM publicly available and prominently signpost the availability on its website.
- 01/11/2007
COBS 20.4.6
See Notes
- 01/11/2007
Annual report to with-profits policyholders
COBS 20.4.7
See Notes
A firm must produce an annual report to its with-profits policyholders, which must:
- (1) state whether, throughout the financial year to which the report relates, the firm believes it has complied with its obligations relating to its PPFM and setting out its reasons for that belief;
- (2) address all significant relevant issues, including the way in which the firm has:
- (a) exercised, or failed to exercise, any discretion that it has in the conduct of its with-profits business; and
- (b) addressed any competing or conflicting rights, interests or expectations of its policyholders (or groups of policyholders) and, if applicable, shareholders (or groups of shareholders), including the competing interests of different classes and generations.
- 01/11/2007
COBS 20.4.8
See Notes
The following documents should be annexed to the annual report in this section:
- (1) the report to with-profits policyholders made by a with-profits actuary in respect of each financial year (see SUP 4.3.16AR(4)); and
- (2) any statement or report provided by the person or committee who provides the independent judgement under the firm's governance arrangements for its with-profits business.
- 01/11/2007
COBS 20.4.9
See Notes
- 01/11/2007
COBS 20.4.10
See Notes
- 01/11/2007
COBS 21
Permitted Links
COBS 21.1
Application
- 01/11/2007
COBS 21.1.1
See Notes
The rules in this section apply on an ongoing basis to linked long-term contracts that are effected by:
- (1) insurers other than EEA insurers; and
- (2) EEA insurers in the United Kingdom.
- 01/11/2007
COBS 21.1.2
See Notes
The rules in this section do not apply to:
- (1) contracts that were effected before 1 July 1994, and under which linked benefits were permitted to be determined before that date;
- (2) contracts effected by an insurer that are linked long-term contracts only because the policyholder is eligible to participate in any established surplus;
- (3) contracts effected by an EEA insurer that are linked long-term contracts only because the policyholder is eligible to participate in an excess of assets representing the whole or a particular part of the long-term insurance fund over the liabilities, or a particular part of the liabilities, of the insurer as determined by the law of the EEA state in which the head office of the insurer is situated;
- (4) [deleted]
- (5) contracts effected before 30 June 1995, to the extent that they provide for benefits to be determined by reference to a collective investment scheme that was a listed security immediately before 1 July 1994; and
- (6) contracts linked to permitted units that were effected before 1 February 1992, except to the extent that they relate to acts or omissions on or after that date.
- 06/04/2008
COBS 21.2
Principles for firms engaged in linked long-term insurance business
- 01/11/2007
COBS 21.2.1
See Notes
- 01/11/2007
COBS 21.2.1B
See Notes
- 01/11/2007
COBS 21.2.2
See Notes
A firm must ensure that its linked assets:
- (1) are capable of being realised in time for it to meet its obligations to linked policyholders; and
- (2) are matched with its linked liabilities as required by the close matching rules.
- 01/11/2007
COBS 21.2.3
See Notes
- 01/11/2007
COBS 21.2.4
See Notes
A firm must notify its linked policyholders of the risk profile and investment strategy for the linked fund:
- (1) at inception, and
- (2) before making any material changes.
- 01/11/2007
COBS 21.2.5
See Notes
- 01/11/2007
COBS 21.2.6
See Notes
- (1) A firm must ensure when selecting linked assets that there is no reasonably foreseeable risk of a conflict of interest with its linked policyholders.
- (2) If a conflict does arise, the firm must take reasonable steps to ensure that the interests of the linked policyholders are safeguarded.
- 01/11/2007
COBS 21.2.7
See Notes
- 01/11/2007
COBS 21.2.8
See Notes
- 01/11/2007
COBS 21.2.9
See Notes
- 01/11/2007
COBS 21.3
Rules for firms engaged in linked long-term insurance business
- 01/11/2007
COBS 21.3.1
See Notes
An insurer must not contract to provide benefits under linked long-term contracts of insurance that are determined:
- (1) wholly or partly, or directly or indirectly, by reference to fluctuations in any index other than an approved index;
- (2) wholly or partly by reference to the value of, or the income from, or fluctuations in the value of, property other than any of the following:
- (a) approved securities;
- (b) listed securities;
- (c) permitted unlisted securities;
- (d) permitted land and property;
- (e) permitted loans;
- (f) permitted deposits;
- (g) permitted scheme interests;
- (h) [deleted]
- (i) cash;
- (j) permitted units;
- (k) permitted stock lending; and
- (l) permitted derivatives contracts.
- 06/02/2008
COBS 21.3.2
See Notes
- 01/11/2007
COBS 21.3.3
See Notes
- 01/11/2007
COBS 21.3.4
See Notes
In order to comply with the requirements of COBS 21.3.3 R a firm should:
- (1) disclose to policyholders the implications of any credit risk exposure they may face in relation to the solvency of the reinsurer; and
- (2) suitably monitor the way the reinsurer manages the business in order to discharge its continuing responsibilities to policyholders.
- 01/11/2007
COBS 21.3.5
See Notes
- (1) Except in the case specified in (2), a firm which proposes to undertake linked long-term insurance business, which is linked to the average earnings index and used for the purposes of orders made by the Department for Work and Pensions under section 148 of the Social Security Administration Act 1992, must notify the FSA in writing of its intention to do so in good time before effecting any such business for the first time, or if there is a material change in the volume of such business, and explain how the risks associated with this business will be safely managed.
- (2) These requirements do not apply in respect of liabilities for which a limited revaluation premium has been paid to the Department for Work and Pensions so that the liability for revaluation, while still linked to orders made under section 148 of the Social Security Administration Act 1992, is limited to 5%.
- 06/04/2008
Transitional Provisions and Schedules
COBS TP 1
Transitional Provisions relating to Client Categorisation
| (1) | (2) | (3) | (4) | (5) | (6) |
| Material to which the transitional provision applies | Transitional provision | Transitional provision: dates in force | Handbook provisions: coming into force | ||
| Overview of transitional provisions for client categorisation | |||||
| 1.1 | COBS 3 | G |
(1) COBS TP 1.2 contains default transitional categorisation provisions in relation to the existing clients of a firm on 1 November 2007. In many cases, they allow a client to be automatically provided with the nearest equivalent categorisation under COBS 3 to their previous categorisation. (2) COBS TP 1.3 explains how the transitional provisions for client categorisation relate to the requirement for a firm to act if it becomes aware that an elective professional client no longer satisfies the initial conditions for its categorisation.(3) The default provisions do not prevent a firm categorising such a client differently in accordance with COBS 3. COBS TP 1.4 provides guidance on how some of the procedural requirements in COBS 3 apply in some such cases. (4) COBS TP 1.5 contains transitional notification obligations, which apply if the default provisions do not allow that client to be provided with the nearest equivalent categorisation or a firm chooses not to take advantage of those provisions in relation to a client. (5) COBS TP 1.6 contains a transitional notification obligation that applies to a firm that, in relation to MiFID or equivalent third country business, takes advantage of the default transitional categorisation provisions to classify a client as a per se professional client. (6) COBS TP 1.9 contains transitional categorisation provisions in relation to clients of a firm that are taken on between 1 November 2007 and 30 June 2008 in relation to business that is not MiFID or equivalent third country business.
|
From 1 November 2007 indefinitely | 1 November 2007 |
| Categorisation of existing clients | |||||
| 1.2 | COBS 3 | R |
(1) An existing client that was correctly categorised as a private customer immediately before 1 November 2007 is a retail client unless and to the extent it is given a different categorisation by the firm under COBS 3. (2) An existing client that was correctly categorised as an intermediate customer immediately before 1 November 2007:
(a) is an elective professional client if it was an expert private customer that had been re-classified as an intermediate customer on the basis of its experience and understanding; or (b) is otherwise a per se professional client;
unless and to the extent it is given a different categorisation by the firm under COBS 3.(3) An existing client that was correctly categorised as a market counterparty immediately before 1 November 2007 is:
(a) for eligible counterparty business that is not MiFID or equivalent third country business, an eligible counterparty; and (b) otherwise, a per se professional client;
unless and to the extent it is given a different categorisation by the firm under COBS 3. |
From 1 November 2007 indefinitely | 1 November 2007 |
| [Note: Article 71(6) of, and third paragraph of section II.2 of Annex II to, MiFID] | |||||
| 1.3 | COBS 3 | G | Under COBS 3.5.9 R, 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 investment firm must take the appropriate action. In the case of a client that has been classified as an elective professional client under COBS TP 1.2R(2)(a), the initial conditions are those that applied to the client's initial categorisation as an intermediate customer. | From 1 November 2007 indefinitely | 1 November 2007 |
| Former inter-professional business | |||||
| 1.4 | COBS 3 | G | The requirement to provide notices under COBS 3.3.1 R only applies in relation to new clients. The requirement to obtain confirmation under COBS 3.6.4 R (2) only applies in relation to prospective counterparties. These obligations are therefore not relevant to the extent that an existing client with whom a firm conducted inter-professional business before 1 November 2007 is categorised as an eligible counterparty under COBS 3 in relation to eligible counterparty business. | From 1 November 2007 indefinitely | 1 November 2007 |
| Transitional notification obligations | |||||
| 1.5 | COBS 3 | R | (1) If a firm does not categorise a client that was a private customer immediately before 1 November 2007 as a retail client, it must notify that client of its categorisation as a professional client or eligible counterparty, as appropriate, on or before that date, or if later, before conducting any further business to which COBS applies for that client. (2) If a firm does not categorise a client that was an intermediate customer immediately before 1 November 2007 as a professional client, it must notify that client of its categorisation as a retail client or eligible counterparty, as appropriate, on or before that date, or if later, before conducting any further business to which COBS applies for that client. (3) If a firm does not categorise a client that was a market counterparty immediately before 1 November 2007 as an eligible counterparty, it must notify that client of its categorisation as a retail client or professional client on or before that date, or if later, before conducting any further business to which COBS applies for that client. |
From 1 November 2007 indefinitely | 1 November 2007 |
| [Note: article 28(1) of the MiFID implementing Directive] | |||||
| 1.6 | COBS 3 | R | If a firm, in relation to MiFID or equivalent third country business, categorises a client who would not otherwise have been a professional client as a professional client under COBS TP 1.2(2)(b) or (3)(b), it must inform that client about the relevant conditions for the categorisation of clients. This notification must be made on or before 1 November 2007, or if later, before conducting any further business to which COBS applies for that client. | From 1 November 2007 indefinitely | 1 November 2007 |
| [Note: article 71(6) of MiFID] | |||||
| 1.7 | G | A notice to a professional client under COBS TP 1.6 should inform that client:
(a) that they have been categorised as a professional client; and (b) of the main differences between the treatment of a retail client and a professional client.
|
From 1 November 2007 indefinitely | 1 November 2007 | |
| 1.8 | R | The record-keeping requirements under COBS 3.8.2 R apply in relation to any client categorisations or re-categorisations made under the transitional provisions for COBS 3. | From 1 November 2007 indefinitely | 1 November 2007 | |
| Categorisation of new clients before 30 June (business that is not MiFID or equivalent third country business) | |||||
| 1.9 | COBS 3 | R |
(1) A new client that could have been correctly categorised as an intermediate customer under the rules in force on 31 October 2007:
(a) may be treated as an elective professional client if it could have been categorised as an expert private customer that had been categorised as an intermediate customer in accordance with COB 4.1.9 R on the basis of its experience and understanding; or
(b)otherwise may be treated as a per se professional client, subject to (3) below.
(2) A firm may categorise as an eligible counterparty or a per se professional client any new client that could have been correctly categorised as a market counterparty under the rules in force on 31 October 2007, provided that the firm may only treat the client as an eligible counterparty for the purposes of eligible counterparty business.
(3) Clients categorised under COBS TP 1.9 must be dealt with in accordance with the relevant procedures and notifications in COBS 3.
(4) This rule only applies in relation to business that is not MiFID or equivalent third country business.
|
From 1 November 2007 to 30 June 2008 | 1 November 2007 |
- 05/11/2007
COBS TP 2
Other Transitional Provisions
| (1) | (2) | (3) | (4) | (5) | (6) |
| Material to which the transitional provision applies | Transitional provision | Transitional provision: dates in force | Handbook provisions: coming into force | ||
| 2.-1 | COBS 4 | R | A firm communicating other than in relation to MiFID business is not required to comply with the financial promotion rules in relation to any financial promotion that: (1) is in writing and was designed to be communicated for longer than three months in similar form; (2) was subject to, and complied with, the relevant rules in COB 3 that were in force on or before 31 October 2007 (or was exempt from them); and (3) continues to be fair, clear and not misleading. |
1 November 2007 to 31 October 2008 | 1 November 2007 |
| 2.1 | COBS 6.1 | G | (1) If a firm provides services of an ongoing nature to an existing client it need not provide information to that client that it would be required to provide under COBS to a new client but which it was not required to provide under COB. (2) Services of an ongoing nature include safekeeping and administration investments and managing investments, |
From 1 November 2007 indefinitely | 1 November 2007 |
| 2.2 | COBS 6.1 | G | (1) If a firm provides a service for an existing client that is not of an ongoing nature and which relates to the same particular type of designated investment as a previous service, the firm need not provide information to that client that it would be required to provide under COBS 6.1 to a new client but which it was not required to provide under COB. (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 described in respect of a previous transaction. |
From 1 November 2007 indefinitely | 1 November 2007 |
| [deleted] | |||||
| [deleted] | |||||
| 2.2B | COBS 6.3 (Disclosing information about services, fees and commission - packaged products) | R | A firm may use the keyfacts logo on an initial disclosure document, a combined initial disclosure document or menu that complied with the rules in COBS 6.3 in effect on 5 August 2008. | From 6 August 2008 until 31 August 2009 | 6 August 2008 |
| 2.2C | COBS 6.3 (Disclosing information about services, fees and commission - packaged products) | G | Under GEN 5.1.5 R and COBS 6.3.4 R, a firm may not use the keyfacts logo on a document designed to comply with disclosure requirements in COBS unless it is a services and costs disclosure document or a combined initial disclosure document prepared in accordance with COBS 6.3 and the relevant COBS 6 annexes. TP 2.2B R allows a firm to use the equivalent documents produced under the COBS rules in effect at 5 August 2008 for a transitional period. | From 6 August 2008 until 31 August 2009. | 6 August 2008 |
| 2.3 | COBS 10.1.2 R | R | For business which is not MiFID or equivalent third country business, compliance with COB 3.9.5 R (2) (Prohibited types of direct offer financial promotion) as it was in force on 31 October 2007 is treated as compliance with COBS 10.1.2 R (arranging or dealing in certain derivatives and warrants for retail clients). | From 1 November 2007 to 31 May 2008 | 1 November 2007 |
| 2.4 | COBS 10.1.2 R | G | This transitional (COBS TP 2.3R) relates to non-MiFID or equivalent third country business arising out of a direct offer financial promotion of a derivative or warrant (or both) for a retail client. This would include, for example, sports or political spread betting. For such business, a firm may begin to comply with the new appropriateness rules at any time within six months of 1 November so long as, in the meantime, it complies with COB 3.9.5 R (2). | From 1 November 2007 to 31 May 2008 | 1 November 2007 |
| 2.4A | COBS 11.2 | R | COB 7.5, as it was in force on 31 October 2007, continues to apply (and COBS 11.2 will not apply) during the transitional period to a firm when executing a customer order in a designated investment when such business is not MiFID or equivalent third country business unless the firm decides to comply with COBS 11.2 before 1 May 2008. | From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.4B | COBS 11.2 | G | The effect of TP 2.4AR is that for a firm which carries on the activities set out in TP 2.4AR COB 7.5 will continue to apply until 1 May 2008 (and COBS 11.2 will not apply), unless the firm decides to comply with COBS 11.2 before 1 May 2008. From 1 May 2008 a firm to which TP 2.4AR applies must comply with the best execution provisions in COBS 11.2. | From 1 November 2007 to 30 April2008 | 1 November 2007 |
| 2.4C | COBS 11.2 | R | If a firm carrying out the activities set out in TP 2.4AR decides to comply with COBS 11.2 before 1 May 2008: (1) it must make a record of the date of the decision and the date from which it is to be effective; and (2) from the effective date it must comply with COBS 11.2 |
From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.4D | COBS 11.2 | R | COBS 11.2 (Best execution) does not apply to a client order for the purchase of or sale of units in a regulated collective investment scheme from or to the operator of that scheme which is not MiFID or equivalent third country business | From 1 May 2008 to 31 October 2008 | 1 May 2008 |
| 2.4E | COBS 12.2 and COBS 12.3 | R | COB 7.16, as it was in force on 31 October 2007, continues to apply (and COBS 12.2 and COBS 12.3 will not apply during the transitional period) to a firm which is not a MiFID investment firm or a third country investment firm which prepares investment research for publication or distribution to its clients, or that publishes or distributes investment research to its clients unless the firm decides to comply with COBS 12.2 and COBS 12.3 sooner than 1 May 2008. | From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.4F | COBS 12.2 and COBS 12.3 | G | The effect of TP 2.4ER is that for a firm which is not a MiFID investment firm or third country investment firm carrying on the activities set out in the transitional rule TP 2.4ER COB 7.16 will continue to apply (and COBS 12.2 and COBS 12.3 will not apply) until 1 May 2008, unless the firm decides to comply with COBS 12.2 and COBS 12.3 before 1 May 2008. From 1 May 2008 a firm to which TP 2.4ER applies must comply with the investment research provisions in COBS 12.2 and COBS 12.3. | From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.4G | COBS 12.2 and COBS 12.3 | R | If a firm carrying out the activities set out in TP 2.4ER decides to comply with COBS 12.2 and COBS 12.3 before 1 May 2008: (1) it must make a record of the date of the decision and the date from which it is to be effective; and (2) from the effective date it must comply with COBS 12.2 and COBS 12.3. |
From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.5 | COBS 13 | R | (1) A firm is not required to prepare a key features document, a key features illustration or the Consolidated Life Directive information for a product if:
(a) the rules would have required the firm to prepare key features for the product if they were still in force; and (b) the firm prepares key features in accordance with the rules as if they were still in force.
(2) A firm is not required to prepare a standardised deterministic projection or an alternative projection for a product in accordance with COBS 13.5.1 R or COBS 13.5.2 R if the firm prepares its projections for life policies, key features schemes, simplified prospectus schemes and stakeholder pension schemes in accordance with the rules as if they were still in force. (3) For the purposes of this rule, 'the rules' are the rules on product disclosure and the customer's right to cancel or withdraw (COB 6) that were in force on 31 October 2007. |
From 1 November 2007 until 31 October 2008 | 1 November 2007 |
| 2.6 | COBS 14.1 and COBS 14.2 | R | A firm is not required to provide a key features document, a key features illustration or the Consolidated Life Directive information for a product if:
(1) the rules would have required the firm to provide a key features document for that product if they were still in force; (2) the firm is satisfied, on reasonable grounds, that providing a key features document in accordance with the rules, as if they were still in force, will not cause:
(a) a client to suffer any prejudice; or (b) the firm to breach its obligations under one or more of the Principles; and
(3) the firm provides a key features document for the product in accordance with the rules as if they were still in force.For these purposes, 'the rules' means the rules on product disclosure and the customer's right to cancel or withdraw (COB 6) that were in force on 31 October 2007. |
From 1 November 2007 until 31 October 2008 | 1 November 2007 |
| 2.7 | COBS 15 | R | Cancellation
(1) In relation to a contract concluded before 1 November 2007 the previous cancellation rules (COB 6.7) continue to apply. (2) In relation to a contract concluded on or after 1 November 2007 any pre-contract disclosure made before that date that complies with the requirements of this sourcebook is to be treated for the purposes of COBS 15 as if made under this sourcebook.
|
1 November 2007 for 6 months | From 1 November 2007 |
| 2.8 | COBS 16.3 (Periodic statements) | G | This transitional rule applies in relation to a periodic reporting period for a periodic statement that includes 1 November 2007. A firm may choose to comply with either COBS 16.3 or COB 8.2 in providing any periodic statement in relation to which this rule applies. |
From 1 November 2007 indefinitely | 1 November 2007 |
| 2.8A | COBS 18 | R | COB, as it was in force on 31 October 2007, continues to apply (and COBS will not apply) to the following activities and firms (as the case may be) in relation to business which is not MiFID or equivalent third country business and COBS does not apply during the transitional period unless the firm decides to comply with COBS before 1 May 2008: (1) Energy market activity and oil market activity; (2) activities referred to in the general application rule related to: (a) commodity futures; (b) commodity options; (c) contracts for differences related to an underlying commodity; or (d) other futures or contracts for differences which are not related to commodities, financial instruments or cash, which is not energy market activity or oil market activity; (3) corporate finance business; (4) a firm which is an operator of a collective investment scheme; (5) Lloyd's market activities; (6) depositaries; (7) OPS firms. |
From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.8B | COBS 18 | G | The effect of TP 2.8AR is that for firms carrying on the activities set out in the transitional rule TP 2.8AR COB will continue to apply (and COBS will not apply) until 1 May 2008, unless the firm decides to comply with COBS before 1 May 2008. From 1 May 2008 a firm to which TP 2.8AR applies must comply with COBS as set out in COBS 18. | From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.8C | COBS 18 | R | If a firm carrying out the activities set out in TP 2.8AR decides to comply with COBS sooner than 1 May 2008: (1) it must make a record of the date of the decision and the date from which it is to be effective; and (2) subject to TP 2.8DR, from the effective date it must comply with COBS as set out in the relevant parts of COBS 18. |
From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.8D | COBS 18 | G | If a firm carrying out the activities set out in TP 2.8AR decides to comply with COBS before 1 May 2008 the following provisions of COB will continue to apply to it in accordance with transitional rules TP 2.12R and TP 2.13R if the firm is not a common platform firm: (1) COB 2.4 (Chinese walls); (2) COB 5.10 (Corporate finance business issues); and (3) COB 7.1 (Conflicts of interest and material interest). |
From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.8E | COBS 18 | R | A decision by a firm carrying out activities set out in TP 2.8AR to comply with COBS before 1 May 2008 must be made in relation to all the COBS provisions applicable to it. The firm may not 'cherry pick'. | From 1 November 2007 to 30 April 2008 | 1 November 2007 |
| 2.9 | COBS 20.2.1 G - COBS 20.2.41 G ; COBS 20.2.53 R - COBS 20.2.60 G (Treating with-profits policyholders fairly) | R | The provisions listed in column (2) do not apply to a firm if, and to the extent that, they are inconsistent with an arrangement that was formally approved by the FSA, a previous regulator or a court of competent jurisdiction, on or before 20 January 2005. | From 1 November 2007 indefinitely | 1 November 2007 |
| 2.10 | COBS 20.2.42R (3) (Policyholder advocate: appointment and role) | R | The provision listed in column (2) does not apply to a firm if it is already carrying out a reattribution and the process is substantially underway to the extent that it has on or before 31 October 2007 appointed a policyholder advocate. | From 1 November 2007 - until completion of the firm's reattribution | 1 November 2007 |
| 2.11 | COBS TP 2.9 | G | The rules and guidance on treating with-profits policyholders fairly (COBS 20.2.1 G - COBS 20.2.41 G; COBS 20.2.53 R - COBS 20.2.60 G) may be contrary to, or inconsistent with, some arrangements that were formally approved by the FSA, a previous regulator or a court of competent jurisdiction, on or before 20 January 2005. The effect of TP 2.9 is that these rules do not apply to such arrangements if, and to the extent that, it is inconsistent with them. A firm should be mindful, however, that, even if some or all of these rules are disapplied, the firm is still subject to the rules in the rest of the Handbook, including Principle 6. |
From 1 November 2007 indefinitely | 1 November 2007 |
| 2.12 | COBS | R | COB 2.4 (Chinese walls) and COB 7.1 (Conflicts of interest) as they were in force on 31 October 2007 continue to apply to designated investment business carried on by a firm which is not a common platform firm. | From 1 November 2007 indefinitely | 1 November 2007 |
| 2.13 | COBS | R | COB 5.10 (Corporate finance business issues) as it was in force on 31 October 2007 continues to apply to corporate finance business carried on by a firm which is not a common platform firm. | From 1 November 2007 indefinitely | 1 November 2007 |
- 06/08/2008
COBS Sch 1
Record keeping requirements
- 01/11/2007
- 06/02/2008
COBS Sch 1.1
See Notes
| The aim of the guidance in the following table is to give the reader a quick overall view of the relevant record keeping requirements. |
- 06/02/2008
COBS Sch 1.2
See Notes
| It is not a complete statement of those requirements and should not be relied on as if it were. |
- 06/02/2008
COBS Sch 1.3
See Notes
| Handbook reference | Subject of record | Contents of record | When record must be made | Retention period |
| COBS 2.3.17R (1) | Fee, commission or non-monetary benefit under COBS 2.3.1R (2)(a)(ii) | Each fee, commission or non-monetary benefit given | When benefit is given | 5 years from date of benefit |
| COBS 2.3.17R (2) | Reasonable indirect benefits | Each benefit given to another firm in accordance with COBS 2.3.14 G | When benefit is given | 5 years from date of benefit |
| COBS 3.8.2 R (1) | Standard form notice to clients and agreements under COBS 3 | Each standard form notice and agreement | When standard form is first used | Relevant period from when the firm ceases to carry on business with clients under that standard form (see COBS 3.8.2 R (3)) |
| COBS 3.8.2 R (2) | Client categorisation | Client categorisation and supporting information, evidence of dispatch to client of any notice (the notice itself where this differs from standard form) and a copy of any agreement entered into | From time of categorisation | Relevant period from when the firm ceases to carry on business with or for that client (see COBS 3.8.2 R (3)) |
| COBS 4.11.1R (1) | Financial promotion | A financial promotion communicated or approved (subject to exemptions) | When communicated or approved | See COBS 4.11.1R (3) |
| COBS 4.11.1R (2) | Telemarketing scripts | Copy of any script used | Date script used | See COBS 4.11.1R (3) |
| COBS 4.11.2 G | Compliance of financial promotions | Firms encouraged to consider recording why a financial promotion is considered compliant. | Date of assessment of compliance | |
| COBS 6.2.12 R | Information about the firm, services and information: packaged products | Scope and range of packaged products | Firm's scope and range - from date on which superseded by more up-to-date record Client-specific records - from date of communication of personal recommendation. |
5 years 5 years |
| COBS 6.3.11 R | Menu | Copy of each menu | From date on which it was updated or replaced | 5 years |
| COBS 8.1.4 R | Client agreements | Documents setting out rights and obligations of the firm and the client | From date of agreement | From whichever is the longer of 5 years or the duration of the relationship with the client. Records relating to a pension transfer, pension opt-out or FSAVC must be retained indefinitely |
| COBS 9.2.9 R | Recommendations on friendly society life policies. | Why the recommendation is considered suitable | Date of recommendation. | 5 years. |
| COBS 9.5.1 G | Suitability | Client information for suitability report and suitability report | From date of suitability report | See COBS 9.5.2 R. |
| COBS 9.6.19 R | Basic advice | Decision to give basic advice, range used and basic advice summary prepared for retail client | Date on which basic advice given | 5 years |
| COBS 9.6.20 R | Scope of basic advice (stakeholder products) | Scope of basic advice and its range (or ranges) of stakeholder products | Date on which the scope and range becomes relevant | 5 years from the date replaced by more up-to-date record |
| COBS 10.7.1 G | Appropriateness | Client information obtained in making assessment of appropriateness and the appropriateness assessment | Date of assessment | 5 years |
| COBS 11.3.2 R | Client orders | Orders executed for clients | See COBS 11.5 | 5 years |
| COBS 11.5.1 EU | Client orders and decisions to deal in portfolio management | Orders received from clients and decisions taken - details in COBS 11.5.1 EU | See COBS 11.5.1 EU | 5 years |
| COBS 11.5.2 EU | Client orders | Execution of orders | See COBS 11.5.1 EU | 5 years |
| COBS 11.5.3 EU | Client orders | Transmission details (see COBS 11.5.3 EU) | Date of transmission | 5 years |
| COBS 11.6.19 R | Prior and periodic disclosure | Prior and periodic disclosure on use of dealing commission | From date of disclosure to customers | 5 years |
| COBS 11.7.4 R | Personal account dealing | Notifications by outsourcing provider and authorisation or prohibition. | Date of notification or decision. | 5 years |
| COBS 12.4.6 R | Research recommendations | Basis of substantiation of research recommendation | Date of recommendation | 5 years |
| COBS 15.3.4 R | Cancellation: exercise of right | Exercise of the right to cancel or withdraw | Date of exercise | As specified in COBS 15.3.4 R(1), (2) and (3) |
| COBS 16.2.7 R | Confirmation to clients | Copy of a confirmation | From date of despatch to client | MiFID or equivalent third country business - 5 years Other business - 3 years |
| COBS 16.3.11 R | Periodic statements | A copy of a periodic statement sent to a client | From date of despatch to client | MiFID or equivalent third country business - 5 years Other business - 3 years |
| COBS 16.6.6 R | Life insurance contracts | Information to be provided during the terms of the contract | When information is given | 5 years after information given |
| COBS 18.5.14 R | Collective investment scheme operators | Periodic statement to be provided to participants | When provided | 3 years |
| COBS 19.1.5 R | Execution only pension transfer or opt out | That no personal recommendation was given to the client | Date of transaction | 5 years |
| COBS 19.2.3 R | Promotion of personal pension scheme | Why the promotion was justified | When promoted | 5 years |
| COBS 20.3.1 R | PPFMs | Each version of the PPFM | Date on which the PPFM is relevant | 5 years |
| COBS TP 1 | Client categorisation transitional | Categorisation or re-categorisation under TP1 | Date of categorisation/ re-categorisation | See COBS 3.8.2 R (2) |
| COBS TP 2 | Investment research transitional | Election to comply with COBS 12.2 - COBS 12.3 sooner than 1 May 2008 | Date of decision and date from which election is to be effective | 5 years |
| COBS TP 2 | Specialist regimes | Election to comply with COBS 18 sooner than 1 May 2008 | Date of decision and date from which election is to be effective | 5 years |
- 06/02/2008
COBS Sch 2
Notification requirements
- 01/11/2007
COBS Sch 2.1
See Notes
| Handbook reference | Matters to be notified | Contents of notification | Trigger event | Time allowed |
| COBS 20.2.45 R | Appointment of policyholder advocate. | The terms on which the firm proposes to appoint a policyholder advocate. | Proposal to appoint policyholder advocate. | As soon as reasonably practicable |
| COBS 21.2.8 R | Breach of COBS 21.3.5 R | Any failure to meet the requirements of COBS 21.3.5 R | Breach of COBS 21.3.5 R | As soon as the firm becomes aware of the failure |
- 06/02/2008
COBS Sch 3
Fees and other required payments
- 01/11/2007
COBS Sch 3.1
See Notes
| There are no requirements for fees or other payments in COBS. |
- 06/02/2008
COBS Sch 4
Powers exercised
- 01/11/2007
COBS Sch 4.1
See Notes
| The following powers and related provisions in or under the Act have been exercised by the FSA to make the rules in COBS: | |
| Section 138 (General rule-making power) | |
| Section 139 (4) (Miscellaneous ancillary matters) | |
| Section 145 (Financial promotion rules) | |
| Section 147 (Control of information rules) | |
| Section 149 (Evidential provisions) | |
| Section 156 (General supplementary powers) | |
| Section 238(5) (Restrictions on promotion) | |
- 06/02/2008
COBS Sch 4.2
See Notes
- 06/02/2008
COBS Sch 5
Rights of action for damages
- 01/11/2007
COBS Sch 5.1
See Notes
| The table below sets out the rules in COBS contravention of which by an authorised person may be actionable under section 150 of the Act (Actions for damages) by a person who suffers loss as a result of the contravention. |
- 06/02/2008
COBS Sch 5.2
See Notes
| If a "Yes" appears in the column headed "For private person?", the rule may be actionable by a "private person" under section 150 (or, in certain circumstances, his fiduciary or representative; see article 6(2) and (3)(c) of the Financial Services and Markets Act 2000 (Rights of Action) Regulations 2001 (SI 2001/2256)). A "Yes" in the column headed "Removed" indicates that the FSA has removed the right of action under section 150(2) of the Act. If so, a reference to the rule in which it is removed is also given. |
- 06/02/2008
COBS Sch 5.3
See Notes
| The column headed "For other person?" indicates whether the rule may be actionable by a person other than a private person (or his fiduciary or representative) under article 6(2) and (3) of those Regulations. If so, an indication of the type of person by whom the rule may be actionable is given. |
- 06/02/2008
COBS Sch 5.4
See Notes
| Right of action under section 150 | ||||||
| Chapter/ Appendix | Section/Annex | Paragraph | For private person? | Removed? | For other person? | |
| All rules in COBS with the status letter "E" | No | No | No | |||
| Any rule in COBS which prohibits an authorised person from seeking to make provision excluding or restricting any duty or liability | Yes | No | Yes | Any other person | ||
| Any rule in COBS which is directed at ensuring that transactions in designated investments are not effected with the benefit of unpublished information that, if made public, would be likely to affect the price of that designated investment | Yes | No | Yes | Any other person | ||
| The fair, clear and not misleading rule | Yes | In part (Note 1) | No | |||
| All other rules in COBS | Yes | No | No | |||
| Notes |
| 1. COBS 4.2.6R provides that if, in relation to a particular communication or financial promotion, a firm takes reasonable steps to ensure it complies with the fair, clear and not misleading rule, a contravention of that rule does not give rise to a right of action under section 150 of the Act. |
- 06/02/2008
COBS Sch 6
Rules that can be waived
- 01/11/2007
COBS Sch 6.1
See Notes
| As a result of regulation 10 of the Regulatory Reform (Financial Services and Markets Act 2000) Order 2007 (SI 2007/1973) the FSA has power to waive all its rules. |
- 06/02/2008