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COBS 3.6 Eligible counterparties

COBS 3.6.1RRP

  1. (1)

    An eligible counterparty is a client that is either a per se eligible counterparty or an elective eligible counterparty.

  2. (2)

    A1 client can only be an eligible counterparty in relation to eligible counterparty business (PRIN 1 Annex 1 R is an exception to this).1

[Note: article 30(1)5 of MiFID]

Per se eligible counterparties

COBS 3.6.2RRP

Each of the following is a per se eligible counterparty (including an entity that is not from an EEA State3 that is equivalent to any of the following) unless and to the extent it is given a different categorisation under this chapter:

  1. (1)

    an investment firm;

  2. (2)

    a credit institution;

  3. (3)

    an insurance company;

  4. (4)

    a collective investment scheme authorised under the UCITS Directive or its management company;

  5. (5)

    a pension fund or its management company;

  6. (6)

    another financial institution authorised or regulated under EU2 legislation or the national law of an EEA State;

    2
  7. (7)

    [deleted]4

  8. (8)

    a national government or its corresponding office, including a public body that deals with5 public debt at national level5;

  9. (9)

    a central bank; and4

  10. (10)

    a supranational organisation.

[Note: first paragraph of article 30(2)5 and first paragraph of article 30(4)5 of MiFID]

COBS 3.6.3GRP

For the purpose of COBS 3.6.2 R (6), a financial institution includes regulated institutions in the securities, banking and insurance sectors.

Elective eligible counterparties

COBS 3.6.4RRP

A firm may treat a client as an elective eligible counterparty in relation to business other than MiFID or equivalent third country business5 if:

  1. (1)

    the client is an undertaking and:

    1. (a)

      is a per se professional client (except for a client that is only a per se professional client because it is an institutional investor under COBS 3.5.2 R (5)) and5:

      1
      1. (i)

        is a body corporate (including a limited liability partnership) which has (or any of whose holding companies or subsidiaries has) called up share capital of at least £10 million (or its equivalent in any other currency at the relevant time); or1

      2. (ii)

        meets the criteria in the rule on meeting two quantitative tests (COBS 3.5.2 R (3)(b)); and5

        1
    2. (b)

      requests such categorisation; and6

  2. (2)

    the firm adheres to the procedure set out at COBS 3.6.4BEU5.

COBS 3.6.4AR

Provided that it adheres to the procedure set out at COBS 3.6.4BEU, a firm may treat a client as an elective eligible counterparty in relation to MiFID or equivalent third country business if the client:6

5
  1. (1)

    is an undertaking;6

  2. (2)

    is a per se professional client, except for a client that is only a per se professional client because it is an institutional investor under COBS 3.5.2R(5); and6

  3. (3)

    requests such categorisation.6

[Note: first paragraph of article 30(3) of MiFID]6

COBS 3.6.4BEU

5Article 71(5) of the MiFID Org Regulation sets out the procedure to be followed where a client requests to be treated as an eligible counterparty.

71 (5) Where a client requests to be treated as an eligible counterparty, in accordance with Article 30(3) of Directive 2014/65/EU, the following procedure shall be followed:

(a) the investment firm shall provide the client with a clear written warning of the consequences for the client of such a request, including the protections they may lose;

(b) the client shall confirm in writing the request to be treated as an eligible counterparty either generally or in respect of one or more investment services or a transaction or type of transaction or product and that they are aware of the consequences of the protection they may have lost as a result of the request.

COBS 3.6.4CR

[deleted]6

COBS 3.6.5GRP

The categories of elective eligible counterparties include an equivalent undertaking that is not from an EEA State provided the above conditions and requirements are satisfied.

COBS 3.6.6RRP

A firm may obtain a prospective counterparty's confirmation that it agrees to be treated as an eligible counterparty either in the form of a general agreement or in respect of each individual transaction.

[Note: second paragraph of article 30(3)5 of MiFID]

Client and firm located in different jurisdictions

COBS 3.6.7RRP

In the case of MiFID or equivalent third country business, in the event of a transaction where the prospective counterparties are located in different EEA States, the firm shall defer to the status of the other undertaking as determined by the law or measures of the EEA State in which that undertaking is established.

[Note: first paragraph of article 30(3)5 of MiFID]