Principle 1 (Integrity) requires a firm to conduct its business with integrity, whilst Principle 5 (Market conduct) requires a firm to observe proper standards of market conduct. In general, firms should undertake transactions at the prevailing market price. Failure to do this may result in a firm participating, whether deliberately or unknowingly, in the concealment of a profit or loss, or in the perpetration of a fraud. A firm should therefore not enter into a non-market-price transaction unless it has taken reasonable steps to ensure that the transaction is not illegal or otherwise for an improper purpose.
Subject to COB 7.15.4 R, a firm must not, as agent or principal, enter into a non-market-price transaction under which it deals in a designated investment with or for a customer, unless it has taken reasonable steps to ensure that the transaction is not being entered into by the customer for an improper purpose.
For further guidance, firms are referred to the corresponding provisions on non-market-price transactions set out in MAR 3 (Inter-professional conduct), in particular MAR 3.5.7 E (Non-market-price transactions). Although these provisions apply to a firm's bilateral dealings with a market counterparty, they are also relevant to business conducted with or for customers.