COBS 18.8A OPS firms

1This section applies to an OPS firm when it carries on OPS activity:

1. (1)

   from an establishment maintained by it in the United Kingdom; and

2. (2)

   which is not MiFID, equivalent third country or optional exemption business.

Where a COBS rule specified in this section applies to an OPS firm, the following modifications apply:

1. (1)

   a reference to:

   1. (a)

      “client” is to be construed as a reference to the occupational pension scheme or welfare trust, as the case may be, in respect of which the OPS firm is acting or intends to act, and with or for the benefit of whom the relevant business is to be carried on; and

   2. (b)

      “investment firm” is to be construed as a reference to an OPS firm;

2. (2)

   if an OPS firm is required by a COBS rule specified in this section to provide information to, or obtain consent from, a client, that firm must ensure that the information is provided to, or consent obtained from, each of the trustees of the occupational pension scheme or welfare trust for whom that firm is acting; and

3. (3)

   subject to the modifications in COBS 18.8A.6 R, COBS 18.8A.15R(4) and COBS 18.8A.16R(4), COBS 1.2.3R (References in COBS to the MiFID Org Regulation) applies where a COBS provision marked “EU” applies to an OPS firm.

Except as specified in this section, the provisions of COBS do not apply to an OPS firm in relation to its OPS activity.

COBS 3 (Client categorisation) applies to an OPS firm but only for the purpose of determining the client categorisation of an occupational pension scheme or welfare trust.

Where a provision of COBS specified in Table 1 applies, a reference to “investment service” is to be construed as a reference to the relevant OPS activity falling within the scope of COBS 18.8A.5R.

In COBS 2.3.1R, a reference to “designated investment business” is to be construed as a reference to any OPS activity that does not fall within the scope of COBS 18.8A.5R.

The provisions in COBS 2.3B (Inducements and research) apply to an OPS firm with the following modifications:

1. (1)

   COBS 2.3B.1R does not apply;

2. (2)

   for the guidance in COBS 2.3B.2G substitute the following guidance:

   “(1) An OPS firm is prohibited from receiving inducements (other than acceptable minor non-monetary benefits) in relation to OPS activity falling within the scope of COBS 18.8A.5R. Compliance with COBS 2.3B (Inducements and research) allows such a firm to receive third party research (relating to OPS activity falling within the scope of COBS 18.8A.5R) without breaching the prohibition in COBS 2.3A.16R.

   (2) An OPS firm may receive third party research in relation to OPS activity falling within the scope of COBS 18.8A.7R without subjecting that research to an assessment under the inducement rule in COBS 2.3.1R if the research is acquired in accordance with COBS 2.3B as such research will not constitute an inducement.”;

3. (3)

   the reference in COBS 2.3B.3R to “COBS 2.3A.5R” should be construed as a reference to COBS 2.3.1R (Rule on inducements);

4. (4)

   in relation to an OPS firm carrying out OPS activity falling within the scope of COBS 18.8A.5R, for the guidance in COBS 2.3B.22G substitute:

   “An OPS firm should also consider whether the goods or services it is looking to receive are acceptable minor non-monetary benefits under COBS 2.3A.19R or COBS 2.3A.22G, which can be received without breaching the inducement rule in COBS 2.3A.16R(2).”;

5. (5)

   COBS 2.3B.22G does not apply to an OPS firm that is carrying on OPS activity falling within the scope of COBS 18.8A.7R; and

6. (6)

   a reference to “ancillary services” or “investment services” in COBS 2.3B.3R, COBS 2.3B.4R and COBS 2.3B.5R is to be construed as a reference to, as applicable, either:

   1. (a)

      OPS activity that falls within the scope of COBS 18.8A.5R; or

   2. (b)

      OPS activity that falls within the scope of COBS 18.8A.7R.

In COBS 9.2.7G for that part which states,

“…The firm should also bear in mind the client’s best interests rule and any other obligation it may have under the rules relating to appropriateness when providing the different service (see COBS 10, Appropriateness (for non-advised services)) and COBS 10A, Appropriateness (for non-advised services) (MiFID provisions)).”,

substitute,

“The firm should bear in mind any other obligation it may have under the rules relating to the different service being requested by the client.”.

1. (1)

   If an OPS firm makes a personal recommendation to a per se professional client the firm is entitled to assume that the client is able financially to bear any related investment risks consistent with the client’s investment objectives for the purposes of COBS 9.2.2R(1)(b).

2. (2)

   If an OPS firm makes a personal recommendation or manages investments for a professional client it is entitled to assume that, in relation to the products, transactions and services for which the professional client is so classified, the client has the necessary level of experience and knowledge for the purposes of COBS 9.2.2R(1)(c).

The provisions in COBS 11.2A (Best execution – MiFID provisions) apply:

1. (1)

   to an OPS firm when it carries on OPS activity which is executing an order for a client in relation to a financial instrument; and

2. (2)

   as modified by COBS 18.8A.15R.

The provisions in COBS 11.2A (Best execution – MiFID provisions) marked “EU” and COBS 11 Annex 1EU (Regulatory Technical Standard 28) apply to an OPS firm to which (1) applies as if they were rules.

1. (1)

   The reference to the inducement requirements in COBS 11.2A.19R is to be construed as a reference to, as applicable, the inducement requirements applying to an OPS firm pursuant to either:

   1. (a)

      COBS 18.8A.5R; or

   2. (b)

      COBS 18.8A.7R.

2. (2)

   The requirement in COBS 11.2A.34EU (see article 65(6) of the MiFID Org Regulation) to make public for each class of financial instruments:

   1. (a)

      the top five investment firms used by an OPS firm to execute client orders; and

   2. (b)

      information on the quality of execution obtained,

   applies in accordance with (3).

3. (3)

   The information to be made public under (2) must:

   1. (a)

      be published for the first time no later than 30 April 2019 and then annually no later than 30 April of each subsequent year; and

   2. (b)

      relate to the calendar year immediately preceding the year in which the information is being made public.

4. (4)

   In COBS 11.2A, a reference to:

   1. (a)

      “investment service” is to be construed as a reference to any OPS activity falling within the scope of COBS 18.8A.13R;

   2. (b)

      “portfolio management” in COBS 11.2A.34EU (see article 65(1) of the MiFID Org Regulation) is to be construed as a reference to OPS activity falling within the scope of COBS 18.8A.13R and which involves the OPS firm placing orders with other entities for execution that result from decisions by the OPS firm to deal in financial instruments on behalf of its client; and

   3. (c)

      “reception and transmission of orders” is to be construed as a reference to OPS activity falling within the scope of COBS 18.8A.13R and which involves the transmission of client orders to other entities for execution.

1. (1)

   The COBS provisions in COBS 11.3 (Client order handling) apply to an OPS firm, as modified by this rule.

2. (2)

   The provisions in COBS 11.3 (Client order handling) marked “EU” apply to an OPS firm as if they were rules.

3. (3)

   A rule in COBS 11.3 which applies only to a UCITS management company or a management company does not apply to an OPS firm.

4. (4)

   A reference to “financial instrument” is to be construed as a reference to a designated investment (other than a P2P agreement).

The provisions in COBS 11.7 (Personal account dealing), other than COBS 11.7.2R(1), apply to an OPS firm.

1. (1)

   An OPS firm must retain its records relating to suitability for a minimum period of three years.

2. (2)

   The requirement in (1) does not apply if the client does not proceed with the recommendation.

The rules in COBS 18 Annex 2 (Record keeping: client orders and transactions) apply to an OPS firm.