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COB 8.2 Periodic statements

Application

COB 8.2.1R

This section applies to a firm when it:

  1. (1)

    acts as an investment manager, or administers any other account or portfolio which includes designated investments, for a customer; or

  2. (2)

    operates a customer's account containing uncovered open positions in a contingent liability investment.

  3. (3)
    1. (a)

      sells a structured capital-at-risk product to a private customer; or

    2. (b)

      advises a private customer on a structured capital-at-risk product; or

    3. (c)

      communicates or approves a financial promotion relating to a structured capital-at-risk product to a person who is a private customer; or

    4. (d)

      manages the relevant assets of the issuer of a structured capital-at-risk product.3

COB 8.2.2G

Examples of uncovered open positions include:

  1. (1)

    selling a call option on an investment not held in the portfolio;

  2. (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 securities denominated in that currency; and

  3. (3)

    transactions having the effect of "selling" an index to an amount greater than the portfolio's holdings of designated investments included in that index.

Purpose

COB 8.2.3G

Principle 7 (Communications with clients) requires a firm to pay due regard to the information needs of its customers. A firm should therefore supply the customer with a regular statement, on a timely basis, providing information on the customer's investment portfolio.

Requirement for a periodic statement

COB 8.2.4R
  1. (1)

    A firm to which COB 8.2.1 R or (2)(2) applies must, promptly and at suitable intervals, provide the customer with a written statement containing adequate information on the value and composition of the customer's account or portfolio with the firm, as at the end of the period covered by the statement, unless COB 8.2.6 R applies.3

  2. (2)

    A firm must not carry out any activity in COB 8.2.1 R (3) unless it:

    1. (a)

      provides; or

    2. (b)

      takes reasonable steps to ensure that there are arrangements for providing;

    promptly, and at suitable intervals, investors in a structured capital-at-risk product with a written statement containing adequate information on the value and composition of the investor's structured capital-at-risk product, as at the end of the period covered by the statement.3

  3. (3)

    A firm need not comply with (2) if COB 8.2.6 R (Exceptions from the requirement to provide a periodic statement) applies.3

COB 8.2.5G

For periodic statements provided electronically, firms are referred to the guidance in COB 1.8 (Application to electronic media).

Exceptions from the requirement to provide a periodic statement

COB 8.2.6R

A firm need not:

  1. (1)

    provide a periodic statement:

    1. (a)

      to a private customer habitually resident outside the United Kingdom;

    2. (b)

      to an intermediate customer, if the firm is not an OPS firm;

    3. (c)

      to an intermediate customer habitually resident outside the United Kingdom, if the firm is an OPS firm;

if the customer concerned has so requested or the firm has taken reasonable steps to establish that he does not wish to receive it; or

  1. (2)

    provide a periodic statement if it would duplicate a statement to be provided by someone else; or5

  2. (3)

    provide a periodic statement in respect of a CTF if the annual statement provided under the CTF Regulations contains the information that would be required to comply with COB 8.2.4 R.5

COB 8.2.6AG

5If COB 8.2.6 R (3) applies, COB 8.2.10 E provides an indication of how the requirement in COB 8.2.4 R may be satisfied. Further guidance that is relevant if the CTF includes a discretionary managed portfolio or a structured capital-at-risk product is contained in COB 8.2.12 E and COB 8.2.17 E.

Promptness, suitable intervals and adequate information

COB 8.2.7E
  1. (1)

    In order to comply with COB 8.2.4 R, a firm, other than an OPS firm conducting OPS activity, should take the steps set out in COB 8.2.10 E.

  2. (2)

    Compliance with (1) may be relied on as tending to establish compliance with COB 8.2.4 R.

  3. (3)

    Contravention of (1) may be relied on as tending to establish contravention of COB 8.2.4 R.

OPS firms

COB 8.2.8E
  1. (1)

    In order to comply with COB 8.2.4 R, an OPS firm conducting OPS activity should:

    1. (a)

      comply with COB 8.2.10 E (1) and (2)and COB 8.2.15 E in all circumstances;

    2. (b)

      comply with COB 8.2.10 E and (b) if the customer is a private customer; and

    3. (c)

      comply with COB 8.2.10 E if the customer is an intermediate customer and the firm relies on the exception in COB 8.1.6 R (3) or COB 8.1.6 R (4) from the requirement to provide confirmations.

  2. (2)

    Compliance with (1)(a) and, where applicable, (b) and (c) may be relied on as tending to establish compliance with COB 8.2.4 R.

  3. (3)

    Contravention of (1)(a) or, where applicable, (b) or (c) may be relied on as tending to establish contravention of COB 8.2.4 R.

Record keeping requirements

COB 8.2.9R

A firm must make a copy of any periodic statement, and retain it for three years from the date on which it was provided.

COB 8.2.10E

Periodic statements - timing and content

This table belongs to COB 8.2.7 E

43

Periodic statements: timing and content

Promptness

(1)

(a)

A periodic statement should be provided to a private customer within 25 business days after the end of the period to which the statement relates.

(b)

A periodic statement should be provided to a private customer within 10 business days after the end of the period to which the statement relates if, at the end of that period, the portfolio includes any uncovered open positions in contingent liability investments.

(c)

A firm whose sole permitted activity is venture capital business should (instead of (a) or (b)) provide a periodic statement to a private customer within 50 business days after the end of the period to which the statement relates.

(d)

Any periodic statement provided to an intermediate customer should be provided within such period as the intermediate customer has on his own initiative agreed with the firm as adequate.

Suitable intervals

(2)

A periodic statement should be provided:

(a)

six-monthly, to a private customer or an intermediate customer not subject to (2)(d), unless the customer's account or portfolio consists entirely of structured capital-at-risk products, in which case the periodic statement may be provided once in any period not exceeding 12 months;3

(b)

once in any other period not exceeding 12 months if the private customer has advised the firm in writing that he wishes to receive less frequent periodic statements than required by (a);

(c)

monthly if the customer's portfolio includes an uncovered open position in a contingent liability investment;

(d)

at such intervals as an intermediate customer has on his own initiative agreed with the firm as adequate.

Adequate information

(3)

A periodic statement should contain:

(a)

(i)

the information set out in COB 8.2.11 E;

(ii)

if applicable the additional information in COB 8.2.12 E, COB 8.2.13 E, COB 8.2.14 E, COB 8.2.15 E and COB 8.2.17 E (but the information set out in COB 8.2.17 E need only be provided once in any period not exceeding 12 months)4; and

(iii)

if a firm relies upon the exceptions in COB 8.1.6 to the requirement to provide confirmations, the information that would have been contained in confirmations complying with COB 8.1.3; or

(b)

information that a private customer habitually resident outside the United Kingdom, or an intermediate customer, has agreed that the firm should provide; or2

(c)

in the case of an OPS firm subject to COB 8.2.8 (3):

(i)

the information that would have been contained in a confirmation complying with COB 8.1.3, relating to the following classes of asset:

(a)

securities which are not readily realisable securities;

(b)

derivatives;

(c)

warrants;

(d)

land and buildings; and

(ii)

in relation to all other transactions not included in (i), a summary of the information that would have been contained in a confirmation complying with COB 8.1.3; this summary should contain sufficient information about the relevant transactions to enable an OPS trustee to determine whether it will be necessary to obtain more detailed information about the relevant transactions.

For example, the summary might disclose, for each asset class:

(a)

the number and value of transactions entered into for the portfolio;

(b)

any material portfolio changes;

(c)

whether a material number of changes were entered into in relation to a single entity and, if so, which ones;

(d)

the information required by item 11 and 12 of COB 8.1.15 E.

COB 8.2.11E

Periodic statements - general information

This table belongs to COB 8.2.10 E

Periodic statements: general information

1

Contents and valueAs at the end of the period covered: the number, description and value of each designated investment held; the amount of cash held; and the total value of the portfolio.

2

Basis of valuationA statement of the basis on which the value of each designated investment has been calculated and, if applicable, a statement that the basis for valuing a particular designated investment has changed since the previous periodic statement. If any designated investments are shown in a currency other than the usual one used for valuation of the portfolio, the relevant currency exchange rates must be shown.

COB 8.2.12E

Periodic statements - additional information required for a discretionary managed portfolio

This table belongs to COB 8.2.10 E

Periodic statements: additional information required for a discretionary managed portfolio** (except OPS firms conducting OPS activity - see COB 8.2.15)

1

Details of any assets loaned or charged

A statement of which investments (if any) were at the closing date 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

the aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during that period.

2

Transactions and changes in composition

Particulars of each transaction entered into for the portfolio during the period; and

the aggregate of money and particulars of all investments transferred into and out of the portfolio during the period; and

the aggregate of any interest payments (and, in the case of a cash deposit ISA, the interest rates applied during the period of account), together with the dates of their application and dividends or other benefits received by the firm for the portfolio during that period.

The particulars required may be disclosed in separate statements (excluding confirmations of transactions) issued to the customer during the period.

3

Charges and remuneration

If not previously advised in writing:

(a)

a statement of the aggregate charges of the firm and its associates; and

(b)

a statement of the amount (or, if provision of this information is not practicable, the basis) 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. (Firms should also note the requirements of COB 2.2.18 R (Periodic disclosure)).1

4

CAT standards

If the periodic statement relates to an ISA intended to be managed in accordance with CAT standards, a statement whether the relevant CAT standards have been adhered to throughout the period of account.

COB 8.2.13E

Periodic statements - additional information required for a contingent liability investment

This table belongs to COB 8.2.10 E

Periodic statements: additional information required for a contingent liability investment

1

Changes in value

The aggregate of money transferred into and out of the portfolio during the valuation period.

2

Open positions

In relation to each open position in the account at the end of the account period, the unrealised profit or loss to the customer (before deducting or adding any commission which would be payable on closing out).

3

Closed positions

In relation to each transaction executed during the account period to close out a customer's position, the resulting profit or loss to the customer after deducting or adding any commission.

Note:

Instead of the specific detail required by item 2 and 3, the statement may show the net profit or loss in respect of the customer's overall position in each contract.

4

Aggregate of contents

The aggregate of each of the following in, or relating to, the customer's portfolio 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 in earlier statements or confirmations to the customer.

5

Option account valuations in respect of each open option contained in the account on the valuation date 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.

Option account valuations may show an average trade price and market price in respect of an option series if the customer buys a number of contracts within the same series.

COB 8.2.14E

Periodic statements - additional information required for a broker fund

This table belongs to COB 8.2.10 E

Periodic statements: additional information required for a broker fund (to the extent that the firm can reasonably be expected to obtain the information)

1

Significant holdings

If any asset is worth more than 5% of the value of the fund, it must be described and its percentage in value stated.

2

Unit-linked life policies (except where a firm is managing a broker fund on behalf of a single customer)

If the fund consists of unit-linked life policies, a comparison, over the account period and over the whole life of the fund, of the percentage change in the price of the units in the fund:

(a)

with the prices of units in the managed unit-linked pension fund of the long-term insurer (if the fund is dedicated to pension policies); or

(b)

with the prices of units in the managed unit-linked life fund of the long-term insurer (in any other case).

3

Price comparison

Unless the firm is managing a broker fund on behalf of a single customer, a comparison of the price of units in the fund or scheme with the published index or sector average stated in the product particulars.

4

Investment objectives and strategies

The current investment objectives and strategies including an indication as to whether or not either of these have changed since the previous report.

5

Benefits and rewards

The cash value of the benefits and rewards which the broker fund adviser and any associate have received directly or indirectly during the reporting period by way of remuneration which may be shown in aggregate or as applicable to each customer or both.

COB 8.2.15E

Periodic statements - minimum content required where an OPS firm conducts OPS activity

This table belongs to COB 8.2.10 E

Periodic statements: information required when an OPS firm conducts 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.

2

Details of any assets 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 customer;

(c)

the aggregate income received on behalf of the customer 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.

COB 8.2.16G
  1. (1)

    The items in COB 8.2.15 should contain sufficient information about the relevant transactions to enable an OPS trustee to determine whether it will be necessary to obtain more detailed information about the relevant transactions.

  2. (2)

    A firm may wish to provide more information than is required by COB 8.2.15, by distinguishing capital and income. If the statement includes some measure of performance, the basis of measurement should be stated.

COB 8.2.17E

Periodic statements - additional information required for a structured capital-at-risk product

This table belongs to COB 8.2.10 E

4
4

Additional information required when a firm sells, advises on or communicates or approves a financial promotion relating to a structured capital-at-risk product to a person who is a private customer, or manages the relevant assets of the issuer of a structured capital-at-risk product, or acts as an investment manager where the investments managed include structured capital-at-risk products 4

1

Statement of 'snap shot' maturity value

A statement of the maturity value of the investment, on the assumption that the relevant index, indices, 'basket' of selected stocks, or other factor remained at the level they were on the closing date of the period covered.

2

Changes in maturity value

A statement of the levels of the relevant index, indices, 'basket' of selected stocks, or other factor, at which the maturity value of the investment would be less than the amount of the initial capital invested, and an indication of by how much less the maturity value would be.

3

Risk warning

A warning that the value of the relevant index, indices, 'basket' of selected stocks, or other factor can go up or down. 3