Content Options

COBS 3.7 Providing clients with a higher level of protection

COBS 3.7.1RRP

A firm must allow a professional client or an eligible counterparty to request re-categorisation as a client that benefits from a higher degree of protection.

[Note: second paragraph of article 24(2) of, and the second paragraph of section I of annex II to, MiFID and the second paragraph of article 50(2) of the MiFID implementing Directive]

COBS 3.7.2GRP

It is the responsibility of a professional client or eligible counterparty to ask for a higher level of protection when it deems it is unable to properly assess or manage the risks involved.

[Note: third paragraph of section I and fourth paragraph of section II.2 of annex II to MiFID and second paragraph of article 50(2) of the MiFID implementing Directive]

COBS 3.7.3RRP

A firm may, either on its own initiative or at the request of the client concerned:

  1. (1)

    treat as a professional client or a retail client a client that might otherwise be categorised as a per se eligible counterparty;

  2. (2)

    treat as a retail client a client that might otherwise be categorised as a per se professional client;

and if it does so, the client will be re-categorised accordingly. Where applicable, this re-categorisation is subject to the requirement for a written agreement in COBS 3.7.5 R.

[Note: second paragraph of article 24(2) of, and second paragraph of section I of annex II to, MiFID and article 28(3) and the second paragraph of article 50(2) of the MiFID implementing Directive]

COBS 3.7.4RRP

If a per se eligible counterparty requests treatment as a client whose business with the firm is subject to conduct of business protections, but does not expressly request treatment as a retail client and the firm agrees to that request, the firm must treat that eligible counterparty as a professional client.

[Note: first paragraph of article 50(2) of the MiFID implementing Directive]

COBS 3.7.5RRP

  1. (1)

    If, in relation to MiFID or equivalent third country business a per se professional client or a per se eligible counterparty requests treatment as a retail client, the client will be classified as a retail client if it enters into a written agreement with the firm to the effect that it will not be treated as a professional client or eligible counterparty for the purposes of the applicable conduct of business regime.

  2. (2)

    This agreement must specify the scope of the re-categorisation, such as whether it applies to one or more particular services or transactions, to one or more types of product or transaction or to one or more rules.

[Note: fourth paragraph of section I of annex II to MiFID and second paragraph of article 50(2) of the MiFID implementing Directive]

COBS 3.7.6GRP

  1. (1)

    In accordance with Principle 7 (communications with clients) if a firm at its own initiative re-categorises a client in accordance with this section, it should notify that client of its new category under this section.

  2. (2)

    If the firm already has an agreement with the client, it should also consider any contractual requirements concerning the amendment of that agreement.

COBS 3.7.7GRP

The ways in which a client may be provided with additional protections under this section include re-categorisation:

  1. (1)

    on a general basis; or

  2. (2)

    on a trade by trade basis; or

  3. (3)

    in respect of one or more specified rules; or

  4. (4)

    in respect of one or more particular services or transactions; or

  5. (5)

    in respect of one or more types of product or transaction.

[Note: second paragraph of article 24(2) of MiFID]

COBS 3.7.8GRP

Re-categorising a client as a retail client under this section does not necessarily mean it will become an eligible complainant under DISP.