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COBS 8.1 Client agreements: designated investment business

Providing a client agreement

COBS 8.1.1R
  1. (1)

    1This chapter applies to a firm in relation to designated investment business carried on for:

    1. (a)

      a retail client; and

    2. (b)

      in relation to MiFID or equivalent third country business, a professional client.

  2. (2)

    If expressly provided, this chapter also applies to a firm in relation to other ancillary services carried on for a client, but only in relation to its MiFID or equivalent third country business.

  3. (3)

    But this chapter does not apply to a firm to the extent that it is effecting contracts of insurance in relation to a life policy issued or to be issued by the firm as principal.

COBS 8.1.2R

If a firm carries on designated investment business, other than advising on investments or advising on conversion or transfer of pension benefits, 2with or for a new retail client, the firm must enter into a written basic agreement, on paper or other durable medium, with the client setting out the essential rights and obligations of the firm and the client.

[Note: article 39 of the MiFID implementing Directive]

COBS 8.1.3R
  1. (1)

    A firm must, in good time before a retail client is bound by any agreement relating to designated investment business or ancillary services or before the provision of those services, whichever is the earlier, provide that client with:

    1. (a)

      the terms of any such agreement; and

    2. (b)

      the information about the firm and its services relating to that agreement or to those services required by COBS 6.1.4 R, including information on communications, conflicts of interest and authorised status.

  2. (2)

    A firm must provide the agreement and information in a durable medium or, where the website conditions are satisfied, otherwise via a website.

  3. (3)

    A firm may provide the agreement and the information immediately after the client is bound by any such agreement 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 communication which prevented the firm from doing so; and

    2. (b)

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

  4. (4)
    1. (a)

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

    2. (b)

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

[Note: article 29(1), (4), (5) and (6) of the MiFID implementing Directive]

Record keeping: client agreements

COBS 8.1.4R
  1. (1)

    A firm must establish a record that includes the document or documents agreed between it and a client which set out the rights and obligations of the parties, and the other terms on which it will provide services to the client.

  2. (2)

    The record must be maintained for at least whichever is the longer of:

    1. (a)

      5 years; or

    2. (b)

      the duration of the relationship with the client; or

    3. (c)

      in the case of a record relating to a pension transfer, pension conversion, 2 pension opt-out or FSAVC, indefinitely.

[Note: article 19(7) of MiFID and article 51(1) of the MiFID implementing Directive. See article 51(3) of the MiFID implementing Directive]

COBS 8.1.5R

For the purposes of this chapter, a firm may incorporate the rights and duties of the parties into an agreement by referring to other documents or legal texts.

[Note: article 19(7) of MiFID and article 39 of the MiFID implementing Directive]

COBS 8.1.6G

When considering its approach to client agreements, a firm should be aware of other obligations in the Handbook which may be relevant. These include the fair, clear and not misleading rule and the rules on disclosure of information to a client before providing services and the rules on distance communications (principally in COBS 2.2, 5, 6 and 13).