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COBS 6.1 Information about the firm and compensation information

Application

COBS 6.1.1 R RP
  1. (1)

    1This section applies to a firm that carries on designated investment business for:

    1. (a)

      a retail client; and

    2. (b)

      in the case of MiFID or equivalent third country business, a client.

  2. (2)

    If expressly provided, this section also applies to ancillary services not covered by (1), but only in the course of MiFID or equivalent third country business carried on with or for a client.

COBS 6.1.2 R RP

If a firm provides basic advice on stakeholder products in accordance with the basic advicerules, this section does not apply to that service.

COBS 6.1.3 G

This section imposes requirements relating to disclosure of information to clients that are additional to the general requirement in COBS 2.2.

Information about a firm and its services

COBS 6.1.4 R RP

A firm must provide a retail client with the following general information, if relevant:

  1. (1)

    the name and address of the firm, and the contact details necessary to enable a client to communicate effectively with the firm;

  2. (2)

    in the case of MiFID or equivalent third country business, the languages in which the client may communicate with the firm, and receive documents and other information from the firm;

  3. (3)

    the methods of communication to be used between the firm and the client including, where relevant, those for the sending and reception of orders;

  4. (4)

    a statement of the fact that the firm is authorised and the name of the competent authority that has authorised it;

  5. (5)

    in the case of MiFID or equivalent third country business, the contact address of the competent authority that has authorised the firm;

  6. (6)

    if the firm is acting through an appointed representativeor, where applicable, a tied agent, a statement of this fact specifying the EEA State in which that appointed representative or tied agent is registered;

  7. (7)

    the nature, frequency and timing of the reports on the performance of the service to be provided by the firm to the client in accordance with the rules on reporting to clients on the provision of services (COBS 16);

  8. (8)
    1. (a)

      in the case of a common platform firm3, a description, which may be provided in summary form, of the conflicts of interest policy;

    2. (b)

      other than in the case of a common platform firm, when a material interest or conflict of interest may or does arise, the manner in which the firm will ensure fair treatment of the client;

  9. (9)

    in the case of a common platform firm, at any time that the client requests it, further details of the conflicts of interest policy.

[Note: article 30(1) of the MiFID implementing Directive]

COBS 6.1.5 G

A firm disclosing details of its authorisation should refer to the appropriate forms of words set out in GEN 4 Annex 1 R or GEN 4 Annex 1A R as appropriate7.

COBS 6.1.6 R RP
  1. (1)

    A firm that manages investments for a client must establish an appropriate method of evaluation and comparison such as a meaningful benchmark, based on the investment objectives of the client and the types of designated investments included in the client portfolio, so as to enable the client to assess the firm's performance.

  2. (2)

    If a firm proposes to manage investments for a retail client, the firm must provide the client with such of the following information as is applicable:

    1. (a)

      information on the method and frequency of valuation of the designated investments in the client portfolio;

    2. (b)

      details of any delegation of the discretionary management of all or part of the designated investments or funds in the client portfolio;

    3. (c)

      a specification of any benchmark against which the performance of the client portfolio will be compared;

    4. (d)

      the types of designated investments that may be included in the client portfolio and types of transaction that may be carried out in those designated investments, including any limits; and

    5. (e)

      the management objectives, the level of risk to be reflected in the manager's exercise of discretion, and any specific constraints on that discretion.

[Note: articles 30(2) and (3) of the MiFID implementing Directive]

Information concerning safeguarding of designated investments belonging to clients and client money

COBS 6.1.7 R RP
  1. (1)

    A firm that holds designated investments or client money for a retail client subject to the custody chapter or the client money chapter must provide that client with the following information:

    444
    1. (a)

      if applicable,

      1. (i)

        that the designated investments or client money of that client may be held by a third party on behalf of the firm;

      2. (ii)

        the responsibility of the firm under the applicable national law for any acts or omissions of the third party; and

      3. (iii)

        the consequences for the client of the insolvency of the third party;

    2. (b)

      if applicable, that the designated investments belonging to the retail client may be held in an omnibus account by a third party and a prominent warning of the resulting risks;

    3. (c)

      if it is not possible under national law for designated investments belonging to a client held with a third party to be separately identifiable from the proprietary designated investments of that third party or of the firm, that fact and a prominent warning of the resulting risks;

    4. (d)

      if applicable, that accounts that contain designated investments or client money belonging to that client are or will be subject to the law of a jurisdiction other than that of a EEA State, an indication that the rights of the client relating to those instruments or money may differ accordingly;

    5. (e)

      a summary description of the steps which it takes to ensure the protection of any designated investments belonging to the client or client money it holds, including summary details of any relevant investor compensation or deposit guarantee scheme which applies to the firm by virtue of its activities in an EEA State.

  2. (2)

    A firm that holds designated investments or client money for a retail client must inform the client:

    1. (a)

      if applicable, about the existence and the terms of any security interest or lien which the firm has or may have over the client'sdesignated investments or client money, or any right of set-off it holds in relation to the client'sdesignated investments or client money; and

    2. (b)

      if applicable, that a depositary may have a security interest or lien over, or right of set-off in relation to those instruments or money.

  3. (3)

    A firm within (1) must also, before entering into securities financing transactions in relation to designated investments held by it on behalf of a retail client, or before otherwise using such designated investments for its own account or the account of another client, in good time before the use of those designated investments provide the client, in a durable medium, with clear, full and accurate information on the obligations and responsibilities of the firm with respect to the use of those designated investments, including the terms for their restitution, and on the risks involved.

  4. (4)

    A firm within (1) that holds clientdesignated investments or client money for a professional client must provide that client with the information in paragraphs (1)(3d3) and (2)(a) and(b).

[Note: articles 29(3), 30(1)(g) and 32 of the MiFID implementing Directive]

COBS 6.1.7A G

5 Firms subject to either or both the custody rules and the client money rules are reminded of the information requirements concerning custody assets and client money in CASS 9.3 (Prime brokerage agreement disclosure annex) and CASS 9.4 (Information to clients concerning custody assets and client money).

COBS 6.1.8 G

[deleted]4

4

Information about costs and associated charges

COBS 6.1.9 R RP

A firm must provide a retail client with information on costs and associated charges including, if applicable:

  1. (1)

    the total price to be paid by the client in connection with the designated investment or the designated investment business or ancillary services, including all related fees, commissions, charges and expenses, and all taxes payable via the firm or, if an exact price cannot be indicated, the basis for the calculation of the total price so that the client can verify it. The commissions charged by the firm must be itemised separately in every case;

  2. (2)

    if any part of the total price referred to (1) is to be paid in or represents an amount of foreign currency, an indication of the currency involved and the applicable currency conversion rates and costs;

  3. (3)

    notice of the possibility that other costs, including taxes, related to transactions in connection with the designated investment or the designated investment business may arise for the client that are not paid via the firm or imposed by it; and

  4. (4)

    the arrangements for payment or other performance.

[Note: article 33 of the MiFID implementing Directive]

COBS 6.1.10 G

The rules on inducements in COBS 2.3 may also require a firm to disclose information to a client in relation to benefits provided to the firm.

Timing of disclosure

COBS 6.1.11 R RP
  1. (1)

    A firm must provide a client with the information required by this section in good time before the provision of designated investment business or ancillary services unless otherwise provided by this rule.

  2. (2)

    A firm may instead provide that information immediately after starting to provide designated investment business or ancillary services if:

    1. (a)

      the firm was unable to comply with (1) because, at the request of the client, the agreement was concluded using a means of distance communication2 which prevented the firm from doing so; and

    2. (b)

      in any case where the rule on voice telephony communications (COBS 5.1.12 R)2 does not otherwise apply, the firm complies with that rule in relation to the retail client, as if that client were a consumer.

[Note: article 29(2), 29(3) and 29(5) of the MiFID implementing Directive]

COBS 6.1.12 G

A firm should take into account COBS 8.1.3 R (1), which requires earlier disclosure of some items of information covered in this section.

Medium of disclosure

COBS 6.1.13 R RP

Except where expressly provided, a firm must provide the information required by this section in a durable medium or via a website (where it does not constitute a durable medium) where the website conditions are satisfied.

[Note: article 29(4) of the MiFID implementing Directive]

Keeping the client up to date

COBS 6.1.14 R RP
  1. (1)

    A firm must notify a client in good time about any material change to the information provided under this section which is relevant to a service that the firm is providing to that client.

  2. (2)

    A firm must provide this notification in a durable medium if the information to which it relates was given in a durable medium.

[Note: article 29(6) of the MiFID implementing Directive]

Existing clients

COBS 6.1.15 G RP
  1. (1)

    A firm need not treat each of several transactions in respect of the same type of financial instrument as a new or different service and so does not need to comply with the disclosure rules in this chapter in relation to each transaction.

    [Note: recital 50 to the MiFID implementing Directive]

  2. (2)

    But a firm should ensure that the client has received all relevant information in relation to a subsequent transaction, such as details of product charges that differ from those disclosed in respect of a previous transaction.

Compensation information

COBS 6.1.16 R RP
  1. (1)

    A firm carrying on MiFID business must make available to a client, who has used or intends to use those services, information necessary for the identification of the compensation scheme or any other investor-compensation scheme of which the firm is a member (including, if relevant, membership through a branch) or any alternative arrangement provided for in accordance with the Investor Compensation Directive.

  2. (2)

    The information under (1) must include the amount and scope of the cover offered by the compensation scheme and any rules laid down by the EEA State pursuant to article 2 (3) of the Investor Compensation Directive.

  3. (3)

    A firm must provide, on the client's request, information concerning the conditions governing compensation and the formalities which must be completed to obtain compensation.

  4. (4)

    The information provided for in this rule must be made available in a durable medium or via a website if the website conditions are satisfied in the official language or languages of the EEA State.

[Note: article 10(1) and (2) of the Investor Compensation Directive]

Record keeping: information about the firm and compensation information

COBS 6.1.17 G

Firms are reminded of the general record-keeping requirements in SYSC 3.2 and SYSC 9.