COBS 10.4 Assessing appropriateness: when it need not be done

COBS 10.4.1RRP
  1. (1)

    A firm is not required to ask its client to provide information or assess appropriateness if:

    1. (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;

    2. (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

    3. (c)

      the firm complies with its obligations in relation to conflicts of interest.

  2. (2)

    The financial instruments are:

    1. (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

    2. (b)

      money market instruments, bonds or other forms of securitised debt (excluding those bonds or securitised debt that embed a derivative); or

    3. (c)

      units in a scheme authorised under the UCITS directive; or

    4. (d)

      other non-complex financial instruments.

  3. (3)

    A financial instrument is non-complex if it satisfies the following criteria:

    1. (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;

    2. (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;

    3. (c)

      it does not involve any actual or potential liability for the client that exceeds the cost of acquiring the instrument; and

    4. (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]

COBS 10.4.2RRP

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]

COBS 10.4.3RRP

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]