A loan could be considered a bridging loan for the purposes of COBS 11A.2.3 when, for example:
it is expressly documented that the intention of both parties is that the loan offers a temporary solution until the client is able to obtain longer-term financing from the capital markets or other future financing;
it has a short term, typically of less than four years from signing, or the client is otherwise discouraged from retaining the loan as longer term financing, for example by stepping up the interest rates after an initial short period; and
the terms provide that the proceeds from the future financing are used as mandatory pre-payment on the loan.
Agreements for the provision of a specified or certain primary market and M&A service by the firm to the client are not prohibited by COBS 11A.2.1R, even where that service will take place in the future.
COBS 11A.2.1R prohibits future service restrictions related to primary market and M&A services which may be required in the future but which, at the date of the agreement, are not yet specified or certain. Future service restrictions are prohibited because they prevent a client from freely deciding, as and when the need for primary market and M&A services arises, which firm to appoint to provide those services.
The future service restrictions prohibited by COBS 11A.2.1R relate to services that will be provided in the future.
An example of restrictions that would therefore not be caught are those which relate to the recuperation of fees for work already undertaken by a firm in relation to a particular service or transaction when the client decides to use another financial institution for the same service or transaction (‘tailgunner clauses’).
Provisions in an agreement that only give a firm the right or opportunity to:
pitch for future business; or
be considered in good faith alongside other providers for future business; or
match quotations from other providers, but which do not prevent the client from selecting the other providers,