Before you give personal recommendations regarding investment business to private customers, you must take reasonable steps to ensure that you have enough personal and financial information about them. The information you gather should be relevant to the services that you agree to provide (COB 5.2.5 R).
Principle 9 (Customers: relationships of trust) requires you to take reasonable care to ensure the suitability of your advice and discretionary decisions. You will not be able to comply with Principle 9 unless you have first obtained enough information about your private customers to enable you correctly to assess their individual requirements. This will help you to meet your responsibility to give suitable advice.
You will need to obtain personal and financial information to be able to recommend a suitable product. The factors that you will need to assess include:
the financial needs and objectives of a private customer;
the affordability of any investment that you recommend to a private customer;
their attitude to risk; and
any foreseeable future events for your client.
There is guidance in the Table at COB 5.2.11 G.
We do not prescribe the method of completing a fact-find and of obtaining personal and financial information about a private customer. Instead, you may design and use a process that is suitable for the market in which you transact business ( COB 5.2.11 G).
Where you advise a customer on a continuing basis, you should regularly review the information you keep about him ( COB 5.2.6 G).
If a private customer declines to provide information, you should advise him that this may adversely affect the quality of the services you can provide ( COB 5.2.7 G).
If you arrange an execution-only transaction you will not normally need to obtain personal or financial information. However, you will still need to do money-laundering checks ( COB 5.2.2 G).
You must keep a record of a private customer's personal and financial circumstances. The table below shows details of how long you must keep the records to meet our requirements. Each period of retention starts from the date when the information was obtained ( COB 5.2.9 R).
If you arrange a pension transfer or opt-out from an occupational pension scheme for a private customer on an execution-only basis, you will need to make and retain a clear record to confirm that no advice was supplied to the customer ( COB 5.2.10 R).
The following sections are also relevant:
•'Suitability' - Chapter 9.9 of this Overview;
•'Assessing your customer's understanding of risk' - Chapter 9.10 of this Overview;
•'Money laundering' - Chapter 14 of this Overview; and
•PRIN 2.1 in the Handbook.