COBS 2.1 Acting honestly, fairly and professionally
The client's best interests rule
- (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)
- (a)
in relation to designated investment business carried on6 for a retail client; 7
- (b)
in relation to MiFID, equivalent third country or optional exemption business5, for any6 client; and7
- (c)
in relation to insurance distribution, for any client.7
- (a)
- (3)
For a management company, this rule applies in relation to any UCITS scheme 8the firm manages.23
Business with eligible counterparties
5In relation to its eligible counterparty business, a firm must act honestly, fairly and professionally, taking into account the nature of the eligible counterparty and its business.
[Note: article 30(1) of MiFID]
Exclusion of liability
A firm must not, in any communication relating to designated investment business seek to:
any duty or liability it may have to a client under the regulatory system.
- (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:
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)
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’ best interests rules
3A full-scope UK AIFM 8must, for all AIFs it manages:
- (1)
act honestly, fairly and with due skill care and diligence in conducting their activities;
- (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)
treat all investors fairly; and
- (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
3Articles 16 to 29 of the AIFMD level 2 regulation provide detailed rules supplementing the relevant provisions of Article 12(1) of AIFMD.