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COBS 14.3 Information about designated investments


COBS 14.3.1RRP

This section applies to a firm in relation to:

  1. (1)

    MiFID or equivalent third country business; and

  2. (2)

    the following regulated activities when carried on for a retail client:

    1. (a)

      making a personal recommendation about a designated investment; or

    2. (b)

      managing investments that are designated investments; or

    3. (c)

      arranging (bringing about) or executing a deal in a warrant or derivative; or

    4. (d)

      engaging in stock lending activity.

Providing a description of the nature and risks of designated investments

COBS 14.3.2RRP

A firm must provide a client with a general description of the nature and risks of designated investments, taking into account, in particular, the client's categorisation as a retail client or a professional client. That description must:

  1. (1)

    explain the nature of the specific type of designated investment concerned, as well as the risks particular to that specific type of designated investment, in sufficient detail to enable the client to take investment decisions on an informed basis; and

  2. (2)

    include, where relevant to the specific type of designated investment concerned and the status and level of knowledge of the client, the following elements:

    1. (a)

      the risks associated with that type of designated investment including an explanation of leverage and its effects and the risk of losing the entire investment;

    2. (b)

      the volatility of the price of designated investments and any limitations on the available market for such investments;

    3. (c)

      the fact that an investor might assume, as a result of transactions in such designated investments, financial commitments and other additional obligations, including contingent liabilities, additional to the cost of acquiring the designated investments; and

    4. (d)

      any margin requirements or similar obligations, applicable to designated investments of that type.

[Note: article 31(1) and (2) of the MiFID implementing Directive]

COBS 14.3.3RRP

If a firm provides a retail client with information about a designated investment that is the subject of a current offer to the public and a prospectus has been published in connection with that offer in accordance with the Prospectus Directive, that firm must inform the retail client where that prospectus is made available to the public.

[Note: article 31(3) of the MiFID implementing Directive]

COBS 14.3.4RRP

Where the risks associated with a designated investment composed of two or more different designated investments or services are likely to be greater than the risks associated with any of the components, a firm must provide an adequate description of the components of that designated investment and the way in which its interaction increases the risks.

[Note: article 31(4) of the MiFID implementing Directive]

COBS 14.3.5RRP

In the case of a designated investment that incorporates a guarantee by a third party, the information about the guarantee must include sufficient detail about the guarantor and the guarantee to enable the retail client to make a fair assessment of the guarantee.

[Note: article 31(5) of the MiFID implementing Directive]

Satisfying the provision rules

COBS 14.3.6GRP


  1. (1)

    A firm need not treat each of several transactions in respect of the same type of financial instrument as a new or different service and so does not need to comply with the provision rules (COBS 14.3.2 R to COBS 14.3.5 R) in relation to each transaction.

  2. (2)

    But a firm should ensure that the client has received all relevant information in relation to a transaction, such as details of product charges that differ from those already disclosed.

[Note: in respect of (1), recital 50 to to the MiFID implementing Directive]

COBS 14.3.7GRP

Providing a key features document or simplified prospectus may satisfy the requirements of the rules in this section.

Product information: form

COBS 14.3.8RRP

The documents and information provided in accordance with the rules in this section must be in a durable medium or available on a website (where that does not constitute a durable medium) that meets2 the website conditions.

[Note: article 29(4) of the MiFID implementing Directive]

The timing rules

COBS 14.3.9RRP

  1. (1)

    The information to be provided in accordance with the rules in this section must be provided in good time before a firm carries on designated investment business or ancillary services with or for a retail client.

  2. (2)

    A firm may provide that information immediately after it begins to carry on that business if:

    1. (a)

      the firm was unable to comply with (1) because, at the request of the client, the agreement was concluded using a means of distance communication which prevented the firm from complying with that rule; and

    2. (b)

      in any case where the rule on voice telephony communications (COBS 5.1.12 R) does not otherwise apply, the firm complies with that rule as if the client was a consumer.

[Note: article 29(2) and (5) of the MiFID implementing Directive]

Keeping the client up-to-date

COBS 14.3.10RRP

A firm must notify a client in good time about any material change to the information provided under the rules in this section which is relevant to a service that the firm is providing to that client. That notification must be given in a durable medium if the information to which it relates is given in a durable medium.

[Note: article 29(6) of the MiFID implementing Directive]

Information about UCITS schemes

COBS 14.3.11RRP

If a firm provides a client with a simplified prospectus or an EEA simplified prospectus that meets the requirements of article 28 of the UCITS Directive, it will have provided appropriate information for the purpose of the requirement to disclose information on:

  1. (1)

    designated investments and investment strategies (COBS 2.2.1R (1)(b)); and

  2. (2)

    costs and associated charges (COBS 2.2.1R (1)(d) and COBS 6.1.9 R1;

in relation to the costs and associated charges in respect of the UCITS scheme itself, including the exit and entry commissions.

[Note: article 34 of the MiFID implementing Directive]

COBS 14.3.12GRP

A simplified prospectus provides sufficient information in relation to the costs and associated charges in respect of the UCITS scheme itself. However, a firm distributing units in a UCITS scheme should also inform a client about all of the other costs and associated charges related to the provision of its services in relation to units in the UCITS scheme.

[Note: recital 55 to the MiFID implementing Directive]