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COBS 2.1 Acting honestly, fairly and professionally

The client's best interests rule

COBS 2.1.1R
  1. (1)

    1A firm must act honestly, fairly and professionally in accordance with the best interests of its client (the client's best interests rule).

  2. (2)

    This rule applies in relation to designated investment business carried on:

    1. (a)

      for a retail client; and

    2. (b)

      in relation to MiFID or equivalent third country business, for any other client.

  3. (3)

    For a management company, this rule applies in relation to any UCITS scheme or EEA UCITS scheme the firm manages.23

[Note: article 19(1) of MiFID and article 14(1)(a) and (b) of the UCITS Directive]2

Exclusion of liability

COBS 2.1.2R

A firm must not, in any communication relating to designated investment business seek to:

  1. (1)

    exclude or restrict; or

  2. (2)

    rely on any exclusion or restriction of;

any duty or liability it may have to a client under the regulatory system.

COBS 2.1.3G
  1. (1)

    In order to comply with the client's best interests rule, a firm should not, in any communication to a retail client relating to designated investment business:

    1. (a)

      seek to exclude or restrict; or

    2. (b)

      rely on any exclusion or restriction of;

    any duty or liability it may have to a client other than under the regulatory system, unless it is honest, fair and professional for it to do so.

  2. (2)

    The general law, including the Unfair Terms Regulations (for contracts entered into before 1 October 2015) and the CRA, 4also limits the scope for a firm to exclude or restrict any duty or liability to a consumer.

AIFMs

COBS 2.1.4R

3A full-scope UK AIFM and an incoming EEA AIFM branch must, for all AIFs it manages:

  1. (1)

    act honestly, fairly and with due skill care and diligence in conducting their activities;

  2. (2)

    act in the best interests of the AIF it manages or the investors of the AIF it manages and the integrity of the market;

  3. (3)

    treat all investors fairly; and

  4. (4)

    not allow any investor in an AIF to obtain preferential treatment, unless such preferential treatment is disclosed in the relevant AIF's instrument constituting the fund.

[Note: article 12(1)(a), (b) and (f) and article 12(1) last paragraph of AIFMD]

Subordinate measures for alternative investment fund managers

COBS 2.1.5G

3Articles 16 to 29 of the AIFMD level 2 regulation provide detailed rules supplementing the relevant provisions of Article 12(1) of AIFMD.