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Status: You are viewing the version of the handbook as on 2005-06-30.

COB 5.6 Excessive charges

Application

COB 5.6.1R

This section applies to a firm that makes a charge to a private customer in the course of, or in connection with its designated investment business.

Purpose

COB 5.6.2G

Principle 6 (Customers' interests) requires a firm to pay due regard to the interests of its customers and treat them fairly. The purpose of this section is to ensure that the charges a firm makes to its private customer are not excessive. The obligation to disclose to a private customer the charges that a firm intends to make are set out in COB 4.3 (Disclosing information about services, fees and commission - packaged products) and COB 5.7 (Disclosure of charges, remuneration and commission).1

Charges to a private customer

COB 5.6.3R

A firm must ensure that its charges to a private customer made in connection with the conduct of designated investment business are not excessive.

COB 5.6.4G

When determining whether a charge is excessive, a firm should consider:

  1. (1)

    the amount of its charges for the services or product in question compared with charges for similar services or products in the market;

  2. (2)

    the degree to which the charges are an abuse of the trust that the customer has placed in the firm; and

  3. (3)

    the nature and extent of the disclosure of the charges to the private customer.

Charges in respect of designated investments that are not readily realisable

COB 5.6.5R

When a firm's charges for advising on or managing a private customer's assets are dependent on the value of designated investments that are not readily realisable investments, the valuation of those designated investments must be based upon the price likely to be agreed between a willing buyer and a willing seller dealing at arm's length who are both in possession of all freely available information concerning those investments.

COB 5.6.6G

In appropriate cases it may be necessary for the basis of a valuation referred to in COB 5.6.5 R to be confirmed or approved by an independent expert.