COB 3.4 Purpose

Section 21(1) of the Act (Restrictions on financial promotion) imposes a restriction on the communication of financial promotions by unauthorised persons. A person must not, in the course of business, communicate an invitation or inducement to engage in investment activity (a financial promotion) unless:

1. (a)

   he is an authorised person; or

2. (b)

   the content of the financial promotion is approved by an authorised person.

However, the Financial Promotion Order exempts from the restriction created by section 21(1) of the Act certain types of financial promotion.

Sections 238 and 240 of the Act (Restrictions on promotion/approval) impose restrictions on the communication and approval by firms of financial promotions relating to unregulated collective investment schemes. See further COB 3.11 (Unregulated collective investment schemes) and AUTH App 1.20 (Additional restriction on the promotion of collective investment schemes).1

The purpose of this chapter is to provide rules and guidance for a firm which wishes to communicate or approve a financial promotion. COB 3.5.2 G provides a guide to the topics covered in this chapter. AUTH App 1 (Financial promotion and related activities) provides further detailed guidance on the financial promotion regime under section 21 of the Act (Financial promotion) which will be relevant in interpreting these rules.1

This chapter amplifies, for activities within its scope:

1. (a)

   Principle 6 (Customers' interests) which requires a firm to pay due regard to the interests of its customers and treat them fairly; and

2. (b)

   Principle 7 (Communications with clients) which requires a firm to pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.