Related provisions for COBS 6.4.4

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COBS 20.2.1GRP
With-profits business, by virtue of its nature and the extent of discretion applied by firms in its operation, involves numerous potential conflicts of interest that might give rise to the unfair treatment of policyholders. The rules in this section address specific situations where the risk may be particularly acute. However, a firm should give careful consideration to any aspect of its operating practice that has a bearing on the interests of its with-profits policyholders to
COBS 20.2.2RRP
Neither Principle 6 (Customers' interests) nor the rules on treating with-profits policyholders fairly (COBS 20.2) relieve a firm of its obligation to deliver each policyholder's contractual entitlement.
COBS 20.2.3RRP
A firm must have good reason to believe that its pay-outs on individual with-profits policies are fair.
COBS 20.2.4GRP
In this section, maturity payments include payments made when a with-profits policy provides for a minimum guaranteed amount to be paid.
COBS 20.2.5RRP
(1) Unless a firm cannot reasonably compare a maturity payment with a calculated asset share, it must:(a) set a target range for the maturity payments that it will make on:(i) all of its with-profits policies; or(ii) each group of its with-profits policies;(b) ensure that each target range:(i) is expressed as a percentage of unsmoothed asset share; and(ii) includes 100% of unsmoothed asset share; and(c) manage its with-profits business, and the business of each with-profit fund,
COBS 20.2.6RRP
Notwithstanding that a firm must aim to make maturity payments that fall within the relevant target range, a firm may make a maturity payment that falls outside the target range if it has a good reason to believe that at least 90% of maturity payments on with-profits policies in that group have fallen, or will fall, within the relevant target range.
COBS 20.2.7GRP
If it is not fair or reasonable to calculate or assess a maturity payment using the prescribed asset share methodology, a firm may use another methodology to set bonus rates, if that methodology properly reflects its representations to with-profits policyholders and it applies that methodology consistently.
COBS 20.2.8RRP
A firm may make deductions from asset share to meet the cost of guarantees, or the cost of capital, only under a plan approved by its governing body and described in its PPFM. A firm must ensure that any deductions are proportionate to the costs they are intended to offset.
COBS 20.2.9RRP
If a firm has approved a plan to make deductions from asset share, it must ensure that its planned deductions do not change unless justified by changes in the business or economic environment, or changes in the nature of the firm's liabilities as a result of policyholders exercising options in their policies.
COBS 20.2.10RRP
If a firm calculates maturity payments using the prescribed asset share methodology, it must manage its with-profits business, and each with-profits fund, with the longer term aim that it will make aggregate maturity payments of 100% of unsmoothed asset share.
COBS 20.2.11GRP
A firm may use its own methodology to calculate surrender payments, but it should have good reason to believe that its methodology produces a result which, in aggregate across all similar policies, is not less than the result of the prescribed asset share methodology. A firm might, for example, test the surrender payments on a suitable range of specimen with-profits policies.
COBS 20.2.12RRP
If a firm calculates surrender payments using the prescribed asset share methodology, it must first calculate what the surrender payment would be if it was a maturity payment calculated by that methodology.
COBS 20.2.13RRP
A firm may then make a deduction from unsmoothed asset share if necessary, in the reasonable opinion of the firm'sgoverning body, to protect the interests of the firm's remaining with-profits policyholders.
COBS 20.2.14GRP
Amounts that might be deducted include:(1) the firm's unrecovered costs, including any financing costs incurred in effecting or carrying out the surrendered with-profits policy to the date of surrender, including the costs that might have been recovered if the policy had remained in force;(2) costs that would fall on the with-profits fund, if the surrender value is calculated by reference to an assumed market value of assets which exceeds the true market value of those assets;(3)
COBS 20.2.15GRP
The provisions dealing with the calculation of surrender payments (COBS 20.2.11 G to COBS 20.2.12 R) do not prevent a firm from setting a target range for surrender payments where the top-end of the range is lower than the top-end of the relevant range for maturity payments.
COBS 20.2.16RRP
A firm must not make a market value reduction to the face value of the units of an accumulating with-profits policy unless:(1) the market value of the with-profits assets in the relevant with-profits fund is, or is expected to be, significantly less than the assumed value of the assets on which the face value of the units of the policy has been based; or(2) there has been, or there is expected to be, a high volume of surrenders, relative to the liquidity of the relevant with-profits
COBS 20.2.17RRP
A firm must:(1) not make a distribution from a with-profits fund, unless the whole of the cost of that distribution can be met without eliminating the regulatory surplus in that with-profits fund;(2) ensure that the amount distributed to policyholders from a with-profits fund is not less than the required percentage of the total amount distributed; and(3) if it adjusts the amounts distributed to policyholders, apply a proportionate adjustment to amounts distributed to shareholders,
COBS 20.2.18RRP
A realistic basis life firm must not make a distribution from a with-profits fund to any person who is not a with-profits policyholder, unless the whole of the cost of that distribution (including the cost of any obligations that will or may arise from the decision to make a distribution) can be met from the excess of the realistic value of assets over the realistic value of liabilities in that with-profits fund.
COBS 20.2.19RRP
A distribution to a person who is not a with-profits policyholder includes a transfer of assets out of a with-profits fund that is not made to satisfy a liability of that fund.
COBS 20.2.20RRP
If, on a distribution, a firm incurs a tax liability on a transfer to shareholders, it must not attribute that tax liability to a with-profits fund, unless:(1) the firm can show that attributing the tax liability to that with-profits fund is consistent with its established practice;(2) that established practice is explained in the firm's PPFM; and(3) that liability is not charged to asset shares.
COBS 20.2.21RRP
At least once a year (or, in the case of a non-directive friendly society, at least once in every three years), a firm'sgoverning body must determine whether the firm'swith-profits fund, or any of the firm'swith-profits fund, has an excess surplus.
COBS 20.2.22ERP
(1) If a with-profits fund has an excess surplus, and to retain that surplus would be a breach of Principle 6 (Customers' interests), the firm should:(a) make a distribution from that with-profits fund; or(b) carry out a reattribution.(2) Compliance with (1) may be relied on as tending to establish compliance with Principle 6 (Customers' interests).(3) Contravention of (1) may be relied on as tending to establish a contravention of Principle 6 (Customers' interests).
COBS 20.2.23RRP
A firm must only charge costs to a with-profits fund1 which have been, or will be, incurred in operating the with-profits fund. This may include a fair proportion of overheads.1
COBS 20.2.24RRP
Subject to COBS 20.2.25 R, COBS 20.2.25A R and COBS 20.2.25B R, a1firm must not pay compensation or redress from a with-profits fund.11
COBS 20.2.25RRP
A proprietary1firm may pay compensation or redress due to a policyholder, or former policyholder, from assets attributable to shareholders, whether or not they are held within a long-term insurance fund.11
COBS 20.2.25ARRP
A mutual may pay compensation or redress due to a policyholder, or formerpolicyholder, from a with-profits fund, but may only pay from assets that would otherwise be attributable to asset shares if, in the reasonable opinion of the firm'sgoverning body, the compensation or redress cannot be paid from any other assets in the with-profits fund. 1
COBS 20.2.25BRRP
A payment or transfer of liabilities made to correct an error and which has the effect of restoring a policyholder, or former policyholder, and the with-profits fund to the position they would have been in if the error had not occurred (a “rectification payment”), is not a payment of compensation or redress for the purposes of COBS 20.2.24 R.1
COBS 20.2.25CGRP
Rectification payments may include, for example, a payment to a policyholder or former policyholder to correct an erroneous underpayment of policy proceeds, or a reimbursement of premiums overpaid. The effect of COBS 20.2.25B R is that a firm may make rectification payments using assets in a with-profits fund.1
COBS 20.2.25DGRP
COBS TP 2.14 R has the effect that payments of compensation and redress arising out of events which took place before 31 July 2009 are subject to COBS 20.2.23 R to COBS 20.2.25 R as in force at 30 July 2009.1
COBS 20.2.26RRP
A proprietary firm must not charge to a with-profits fund any amounts paid or payable to a skilled person in connection with a report under section 166 of the Act (Reports by skilled persons) if the report indicates that the firm has, or may have, materially failed to satisfy its obligations under the regulatory system1.1
COBS 20.2.27RRP
A firm must not charge a contribution to corporation tax to a with-profits fund, if that contribution exceeds the notional corporation tax liability that would be charged to that with-profits fund if it were assessed to tax as a separate body corporate.
COBS 20.2.28RRP
If a firm proposes to effect new contracts of insurance in an existing with-profits fund, it must only do so on terms that are, in the reasonable opinion of the firm'sgoverning body, unlikely to have a material adverse effect on the interests of its existing with-profits policyholders.
COBS 20.2.29GRP
In some circumstances, it may be difficult or impossible for a firm to mitigate the risk of a material adverse effect on its existing, or new, with-profits policyholders, unless it establishes a new bonus series or with-profits fund. Circumstances that might cause a firm to establish a new bonus series or with-profits fund include:(1) where the firm has a high level of guarantees or options in its existing with-profits policies, which might place an excessive burden on new with-profits
COBS 20.2.30GRP
When a firm prices the new insurance business that it proposes to effect in an existing with-profits fund, it should estimate the volume of new insurance business that it is likely to effect and then build in adequate margins that will allow it to recover any acquisition costs to be charged to the with-profits fund.
COBS 20.2.31GRP
When a firm sets a target volume for new insurance business in an existing with-profits fund, it should pay particular attention to the risk of disadvantage to existing with-profits policyholders. Those policyholders might be disadvantaged, for example, by the need to retain additional capital to support a rapid growth in new business, when that capital might have been distributed in the ordinary course of the firm's existing business.
COBS 20.2.32RRP
A firm carrying on with-profits business must not:(1) make a loan to a connected person using assets in a with-profits fund; or(2) give a guarantee to, or for the benefit of, a connected person, where the guarantee will be backed using assets in a with-profits fund;unless that loan or guarantee:(3) will be on commercial terms;(4) will, in the reasonable opinion of the firm's senior management, be beneficial to the with-profits policyholders in the relevant with-profits fund; and(5)
COBS 20.2.33GRP
(1) If a firm, or a connected person, provides support to a with-profits fund (for example, by a contingent loan), no reliance should be placed on that support when the firm assesses the with-profits fund's financial position unless there are clear and unambiguous criteria governing any repayment obligations to the support provider.(2) The degree of reliance placed on that support should depend on the subordination of the support to the fair treatment of with-profits policyholders
COBS 20.2.34GRP
Where assets from outside a with-profits fund are made available to support that fund (and there is no ambiguity in the criteria governing any repayment obligations to the support provider), a firm should manage the fund disregarding the liability to repay those assets, at least in so far as that is necessary for its policyholders to be treated fairly.
COBS 20.2.35GRP
When a firm determines its investment strategy, and the acceptable level of risk within that strategy, it should take into account:(1) the extent of the guarantee in its with-profits policies;(2) any representation that it has made to its with-profits policyholders;(3) its established practice; and(4) the amount of capital support available.
COBS 20.2.36RRP
If a proprietary firm is considering using with-profits assets to finance the purchase of another business, directly or by or through a connected person, or if a firm is considering whether it should retain such an investment, it should consider whether the purchase or retention would be, or will remain, fair to its with-profits policyholders. When a firm makes that assessment it should consider whether it would be more appropriate for the investment to be made using assets other
COBS 20.2.37GRP
If a firm carries out non-profit insurance business in a with-profits fund, it should review the profitability of the non-profit insurance business regularly.
COBS 20.2.38GRP
If a firm has reinsured its with-profits insurance business into another insurance undertaking, it should take reasonable steps to discharge its responsibilities to its with-profits policyholders, in respect of the reinsured business. Those steps should include maintaining adequate controls.
COBS 20.2.39RRP
A firm must not enter into a material transaction relating to a with-profits fund unless, in the reasonable opinion of the firm'sgoverning body, the transaction is unlikely to have a material adverse effect on the interests of that fund's existing with-profits policyholders.
COBS 20.2.40RRP
A material transaction includes a series of related non-material transactions which, if taken together, are material.
COBS 20.2.42RRP
A firm that is seeking to make a reattribution of its inherited estate must:(1) identify at the earliest appropriate point a policyholder advocate, who is free from any conflicts of interest that may be, or may appear to be, detrimental to the interests of policyholders, to negotiate with the firm on behalf of relevant with-profits policyholders;(2) seek the approval of the FSA for the appointment of the policyholder advocate as soon as he is identified, or appoint a policyholder
COBS 20.2.43GRP
The firm should include an independent element in the policyholder advocate selection process, which may include consulting representative groups of policyholders or using the services of a recruitment consultant. When considering an application for approval of a nominee to perform the policyholder advocate role, the FSA will have regard to the extent to which the firm has involved others in the selection process.
COBS 20.2.44GRP
The precise role of the policyholder advocate in any particular case will depend on the nature of the firm and the reattribution proposed. A firm will need to discuss with the FSA the precise role of the policyholder advocate in a particular case (COBS 20.2.45 R). However, the role of the policyholder advocate should include:(1) negotiating with the firm, on behalf of the relevant with-profits policyholders, the benefits to be offered to them in exchange for the rights or interests
COBS 20.2.45RRP
A firm must:(1) notify the FSA of the terms on which it proposes to appoint a policyholder advocate (whether or not the candidate was nominated by the FSA); and(2) ensure that the terms of appointment for the policyholder advocate:(a) stress the independent nature of the policyholder advocate's appointment and function, and are consistent with it;(b) define the relationship of the policyholder advocate to the firm and its policyholders;(c) set out arrangements for communications
COBS 20.2.46GRP
A firm may include, within the policyholder advocate's terms of appointment, arrangements for the policyholder advocate to be indemnified in respect of certain claims that may be made against him in connection with the performance of his functions. If such indemnity is included, it should not include protection against any liability arising from acts of bad faith.
COBS 20.2.47RRP
Where a firm is not otherwise required to appoint an independent expert, it must:(1) appoint a reattribution expert to undertake an objective assessment of its reattribution proposals, who must be:(a) nominated or approved by the FSA before he is appointed; and(b) free from any conflicts of interest that may, or may appear to, undermine his independence or the quality of his report;(2) ensure that the reattribution expert's terms of appointment allow him to communicate freely
COBS 20.2.48GRP
A reattribution expert's report should comply with the applicable rules on expert evidence. The scope and content of the report should be substantially similar to that of the report required of an independent expert under SUP 18.2 (Insurance business transfers), as if (where appropriate) a reference to:(1) the 'scheme report' was a reference to the 'reattribution expert's report';(2) the 'independent expert' was a reference to the 'reattribution expert'; and(3) the 'scheme' was
COBS 20.2.49RRP
A firm must ensure that every policyholder that may be affected by the proposed reattribution is sent appropriate and timely information about:(1) the reattribution process, including the role of the policyholder advocate, the independent expert or reattribution expert, as the case may be, and other individuals appointed to perform particular functions;(2) the reattribution proposals and how they affect the relevant policyholders, including an explanation of any benefits they
COBS 20.2.50RRP
An adequate summary of the report by the reattribution expert must be made available to every policyholder that may be affected by the proposed reattribution.
COBS 20.2.51RRP
A firm must give relevant with-profits policyholders the option to:(1) individually accept or reject the final proposals for the reattribution; or(2) (if the legal process to be followed allows the majority of policyholders to bind the minority) vote on whether the firm should go ahead with those proposals.
COBS 20.2.52GRP
(1) Reattribution and insurance business transfer costs (excluding policyholder advocate costs) should be met from shareholder funds. A firm may present alternative arrangements if it can show good reasons for doing so.(2) Shareholders should pay a reasonable proportion of the policyholder advocate's costs.(3) If a reattribution proposal is not successful, the FSA would expect the costs of the policyholder advocate to be met by the person initiating the proposal. That will usually
COBS 20.2.53RRP
A firm must:(1) inform the FSA and its with-profits policyholders within 28 days; and(2) submit a run-off plan to the FSA as soon as reasonably practicable and, in any event, within three months;of first ceasing to effect new contracts of insurance in a with-profits fund.
COBS 20.2.54RRP
A firm will be taken to have ceased to effect new contracts of insurance in a with-profits fund:(1) when any decision by the governing body to cease to effect new contracts of insurance takes effect; or(2) where no such decision is made, when the firm is no longer:(a) actively seeking to effect new contracts of insurance in that fund; or(b) effecting new contracts of insurance in that fund, except by increment.
COBS 20.2.55GRP
A firm must contact the FSA to discuss whether it has, or should be taken to have, ceased to effect new contracts of insurance if:(1) it is no longer effecting a material volume of new with-profits policies in a particular with-profits fund, other than by reinsurance; or(2) it cedes by way of reinsurance most of the new with-profits policies which it continues to effect.
COBS 20.2.56RRP
The run-off plan required by this section must:(1) demonstrate how the firm will ensure a fair distribution of the closed with-profits fund, and its inherited estate (if any); and(2) be approved by the firm'sgoverning body.
COBS 20.2.57GRP
A firm should also include the information described in Appendix 2.15 (Run-off plans for closed with-profits funds) of the Supervision manual in its run-off plan.
COBS 20.2.58GRP
When a firm tells its with-profits policyholders that it has ceased to effect new contracts of insurance in a with-profits fund, it should also explain:(1) why it has done so;(2) what changes it has made, or proposes to make, to the fund's investment strategy (if any);(3) how closure may affect with-profits policyholders (including any reasonably foreseeable effect on future bonus prospects);(4) the options available to with-profits policyholders and an indication of the potential
COBS 20.2.59GRP
A firm may not be able to provide its with-profits policyholders with all of the information described above until it has prepared the run-off plan. In those circumstances, the firm should:(1) tell its with-profits policyholders that that is the case;(2) explain what is missing and give a time estimate for its supply; and(3) provide the missing information as soon as possible, and within the time estimate given.
COBS 20.2.60GRP
(1) If non-profit insurance business is written in a with-profits fund, a firm should take reasonable steps to ensure that the economic value of any future profits expected to emerge on the non-profit insurance business is available for distribution during the lifetime of the with-profits business.(2) Where it is agreed by its with-profits policyholders, and subject to meeting the requirements for effecting new contracts of insurance in an existing with-profits fund (COBS 20.2.28
COBS 11.2.1RRP
A firm must take all reasonable steps to obtain, when executing orders, the best possible result for its clients taking into account the execution factors. [Note: article 21(1) of MiFID][Note: The Committee of European Securities Regulators (CESR) has issued a Question and Answer paper on best execution under MiFID. This paper also incorporates the European Commission's response to CESR's questions regarding the scope of the best execution obligations under MiFID. The paper can
COBS 11.2.2GRP
The obligation to take all reasonable steps to obtain the best possible result for its clients (see COBS 11.2.1 R) should apply to a firm which owes contractual or agency obligations to the client. [Note: recital 33 to MiFID]
COBS 11.2.3GRP
Dealing on own account with clients by a firm should be considered as the execution of client orders, and therefore subject to the requirements under MiFID, in particular, those obligations in relation to best execution. [Note: first sentence of recital 69 to the MiFID implementing Directive]
COBS 11.2.4GRP
If a firm provides a quote to a client and that quote would meet the firm's obligations to take all reasonable steps to obtain the best possible result for its clients if the firm executed that quote at the time the quote was provided, the firm will meet those same obligations if it executes its quote after the client accepts it, provided that, taking into account the changing market conditions and the time elapsed between the offer and acceptance of the quote, the quote is not
COBS 11.2.5GRP
The obligation to deliver the best possible result when executing client orders applies in relation to all types of financial instruments. However, given the differences in market structures or the structure of financial instruments, it may be difficult to identify and apply a uniform standard of and procedure for best execution that would be valid and effective for all classes of instrument. Best execution obligations should therefore be applied in a manner that takes into account
COBS 11.2.6RRP
When executing a client order, a firm must take into account the following criteria for determining the relative importance of the execution factors:(1) the characteristics of the client including the categorisation of the client as retail or professional;(2) the characteristics of the client order;(3) the characteristics of financial instruments that are the subject of that order;(4) the characteristics of the execution venues to which that order can be directed. [Note: article
COBS 11.2.7RRP
Where a firm executes an order on behalf of a retail client, the best possible result must be determined in terms of the total consideration, representing the price of the financial instrument and the costs related to execution, which must include all expenses incurred by the client which are directly related to the execution of the order, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.
COBS 11.2.8GRP
For the purposes of ensuring that a firm obtains the best possible result for the client when executing a retail client order in the absence of specific client instructions, the firm should take into consideration all factors that will allow it to deliver the best possible result in terms of the total consideration, representing the price of the financial instrument and the costs related to execution. Speed, likelihood of execution and settlement, the size and nature of the order,
COBS 11.2.9GRP
A firm's execution policy should determine the relative importance of each of the execution factors or establish a process by which the firm will determine the relative importance of the execution factors. The relative importance that the firm gives to those execution factors must be designed to obtain the best possible result for the execution of its client orders. Ordinarily, the FSA would expect that price will merit a high relative importance in obtaining the best possible
COBS 11.2.10RRP
For the purposes of delivering best execution for a retail client where there is more than one competing venue to execute an order for a financial instrument, in order to assess and compare the results for the client that would be achieved by executing the order on each of the execution venues listed in the firm's order execution policy that is capable of executing that order, the firm's own commissions and costs for executing the order on each of the eligible execution venues
COBS 11.2.11GRP
The obligation to deliver best execution for a retail client where there are competing execution venues is not intended to require a firm to compare the results that would be achieved for its client on the basis of its own execution policy and its own commissions and fees, with results that might be achieved for the same client by any other firm on the basis of a different execution policy or a different structure of commissions or fees. Nor is it intended to require a firm to
COBS 11.2.12RRP
A firm must not structure or charge its commissions in such a way as to discriminate unfairly between execution venues. [Note: article 44(4) of the MiFID implementing Directive]
COBS 11.2.13GRP
A firm would be considered to structure or charge its commissions in a way which discriminates unfairly between execution venues if it charges a different commission or spread to clients for execution on different execution venues and that difference does not reflect actual differences in the cost to the firm of executing on those venues. [Note: recital 73 to the MiFID implementing Directive]
COBS 11.2.14RRP
A firm must establish and implement effective arrangements for complying with the obligation to take all reasonable steps to obtain the best possible result for its clients. In particular, the firm must establish and implement an order execution policy to allow it to obtain, for its client orders, the best possible result in accordance with that obligation. [Note: article 21(2) of MiFID]
COBS 11.2.15RRP
The order execution policy must include, in respect of each class of financial instruments, information on the different execution venues where the firm executes its client orders and the factors affecting the choice of execution venue. It must at least include those execution venues that enable the firm to obtain on a consistent basis the best possible result for the execution of client orders. [Note: paragraph 1 of article 21(3) of MiFID]
COBS 11.2.16GRP
(1) When establishing its execution policy, a firm should determine the relative importance of the execution factors, or at least establish the process by which it determines the relative importance of these factors, so that it can deliver the best possible result to its clients.(2) In order to give effect to that policy, a firm should select the execution venues that enable it to obtain on a consistent basis the best possible result for the execution of client orders.(3) A firm
COBS 11.2.17GRP
The provisions of this section which provide that costs of execution include a firm's own commissions or fees charged to the client for the provision of an investment service should not apply for the purpose of determining what execution venues must be included in the firm's execution policy. [Note: recital 72 to the MiFID implementing Directive]
COBS 11.2.18GRP
The provisions of this section as to execution policy are without prejudice to the general obligation of a firm to monitor the effectiveness of its order execution arrangements and policy and assess the execution venues in its execution policy on a regular basis. [Note: recital 74 to the MiFID implementing Directive]
COBS 11.2.19RRP
(1) Whenever there is a specific instruction from the client, the firm must execute the order following the specific instruction.[Note: article 21(1) of MiFID](2) A firm satisfies its obligation under this section to take all reasonable steps to obtain the best possible result for a client to the extent that it executes an order, or a specific aspect of an order, following specific instructions from the client relating to the order or the specific aspect of the order. [Note: article
COBS 11.2.20GRP
When a firm executes an order following specific instructions from the client, it should be treated as having satisfied its best execution obligations only in respect of the part or aspect of the order to which the client instructions relate. The fact that the client has given specific instructions which cover one part or aspect of the order should not be treated as releasing the firm from its best execution obligations in respect of any other parts or aspects of the client order
COBS 11.2.21GRP
A firm should not induce a client to instruct it to execute an order in a particular way, by expressly indicating or implicitly suggesting the content of the instruction to the client, when the firm ought reasonably to know that an instruction to that effect is likely to prevent it from obtaining the best possible result for that client. However, this should not prevent a firm inviting a client to choose between two or more specified trading venues, provided that those venues
COBS 11.2.22RRP
A firm must provide appropriate information to its clients on its order execution policy. [Note: paragraph 2 of article 21(3) of MiFID]
COBS 11.2.23RRP
(1) A firm must provide a retail client with the following details on its execution policy in good time prior to the provision of the service:(a) an account of the relative importance the firm assigns, in accordance with the execution criteria, to the execution factors, or the process by which the firm determines the relative importance of those factors;(b) a list of the execution venues on which the firm places significant reliance in meeting its obligation to take all reasonable
COBS 11.2.24RRP
Where the order execution policy provides for the possibility that client orders may be executed outside a regulated market or an MTF, the firm must, in particular, inform its clients about this possibility. [Note: paragraph 3 of article 21(3) of MiFID]
COBS 11.2.25RRP
A firm must obtain the prior consent of its clients to the execution policy. [Note: paragraph 2 of article 21 (3) of MiFID]
COBS 11.2.26RRP
A firm must obtain the prior express consent of its clients before proceeding to execute their orders outside a regulated market or an MTF. The firm may obtain this consent either in the form of a general agreement or in respect of individual transactions. [Note: paragraph 3 of article 21(3) of MiFID]
COBS 11.2.27RRP
A firm must monitor the effectiveness of its order execution arrangements and execution policy in order to identify and, where appropriate, correct any deficiencies. In particular, it must assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for the client or whether it needs to make changes to its execution arrangements. The firm must notify clients of any material changes to their order execution
COBS 11.2.28RRP
(1) A firm must review annually its execution policy, as well as its order execution arrangements.(2) This review must also be carried out whenever a material change occurs that affects the firm's ability to continue to obtain the best possible result for the execution of its client orders on a consistent basis using the venues included in its execution policy. [Note: article 46(1) of the MiFID implementing Directive]
COBS 11.2.29RRP
A firm must be able to demonstrate to its clients, at their request, that it has executed their orders in accordance with its execution policy. [Note: article 21(5) of MiFID]
COBS 11.2.30RRP
A firm must, when providing the service of portfolio management, comply with the obligation to act in accordance with the best interests of its clients when placing orders with other entities for execution that result from decisions by the firm to deal in financial instruments on behalf of its client. [Note: article 45(1) of MiFID implementing Directive]
COBS 11.2.31RRP
A firm must, when providing the service of reception and transmission of orders, comply with the obligation to act in accordance with the best interests of its clients when transmitting client orders to other entities for execution. [Note: article 45(2) of the MiFID implementing Directive]
COBS 11.2.32RRP
In order to comply with the obligation to act in accordance with the best interests of its clients when it places an order with, or transmits an order to, another entity for execution, a firm must:[Note: article 45(3) of the MiFID implementing Directive](1) take all reasonable steps to obtain the best possible result for its clients taking into account the execution factors. The relative importance of these factors must be determined by reference to the execution criteria and,
COBS 11.2.33GRP
This section is not intended to require a duplication of effort as to best execution between a firm which provides the service of reception and transmission of orders or portfolio management and any firm to which that firm transmits its orders for execution. [Note: recital 75 to the MiFID implementing Directive]
COBS 11.2.34RRP
The provisions applying to a firm which places orders with, or transmits orders to, other entities for execution (see COBS 11.2.30 R to COBS 11.2.33 G) will not apply when the firm which provides the service of portfolio management and/or service of reception and transmission of orders also executes the orders received or the decisions to deal on behalf of its client's portfolio. In those cases the requirements of this section for firms who execute orders apply (see COBS 11.2.1
COBS 11.6.1GRP
1This section deals with the acceptance of certain inducements by investment managers and builds upon the rule on inducements (COBS 2.3.1 R). Investment managers should ensure they comply with both this section and the rule on inducements.
COBS 11.6.2RRP
This section applies to a firm that acts as an investment manager when it executescustomer orders that relate to:(1) shares; and(2) (a) warrants;(b) certificates representing certain securities;(c) options; and(d) rights to or interests in investments of the nature referred to in (a) to (c);to the extent that they relate to shares.
COBS 11.6.3RRP
(1) An investment manager must not accept goods or servicesin addition to the execution of its customer orders if it:(a) executes its customer orders through a broker or another person;(b) passes on the broker's or other person'scharges to its customers; and(c) is offered goods or services in return for the charges referred to in (b).(2) This prohibition does not apply if the investment manager has reasonable grounds to be satisfied that the goods or services received in return
COBS 11.6.4ERP
(1) Where the goods or services relate to the execution of trades, an investment manager should have reasonable grounds to be satisfied that the requirements of the rule on use of dealing commission (COBS 11.6.3 R) are met if the goods or services are:(a) linked to the arranging and conclusion of a specific investment transaction (or series of related transactions); and (b) provided between the point at which the investment manager makes an investment or trading decision and the
COBS 11.6.5ERP
(1) Where the goods or services relate to the provision of research, an investment manager will have reasonable grounds to be satisfied that the requirements of the rule on use of dealing commission (COBS 11.6.3 R) are met if the research:(a) is capable of adding value to the investment or trading decisions by providing new insights that inform the investment manager when making such decisions about its customers' portfolios;(b) whatever form its output takes, represents original
COBS 11.6.6GRP
An example of goods or servicesrelating to the execution of trades that the FSA does not regard as meeting the requirements of the rule on use of dealing commission (COBS 11.6.3 R) is post-trade analytics.
COBS 11.6.7GRP
Examples of goods or services that relate to the provision of research that the FSA does not regard as meeting the requirements of the rule on use of dealing commission (COBS 11.6.3 R) include price feeds or historical price data that have not been analysed or manipulated to reach meaningful conclusions.
COBS 11.6.8GRP
Examples of goods or services that relate to the execution of trades or the provision of research that the FSA does not regard as meeting the requirements of either evidential provisions COBS 11.6.4 E or COBS 11.6.5 E include:(1) services relating to the valuation or performance measurement of portfolios;(2) computer hardware; (3) connectivity services such as electronic networks and dedicated telephone lines; (4) seminar fees;(5) subscriptions for publications;(6) travel, accommodation
COBS 11.6.9GRP
The reference to research in the rule on use of dealing commission (COBS 11.6.3 R) is not confined to investment research as defined in the Glossary. The FSA's view is that research can include, for example, the goods or services encompassed by investment research, provided that they are directly relevant to and are used to assist in the management of investments on behalf of customers. In addition, any goods or services that relate to the provision of research that the FSA regards
COBS 11.6.10GRP
This section applies only to arrangements under which an investment manager receives from brokers or other persons goods or services that relateto the execution of trades or the provision of research. It has no application in relation to execution and research generated internally by an investment manager itself.
COBS 11.6.11GRP
An investment manager should not enter into any arrangements that could compromise its ability to comply with its best execution obligations (COBS 11.2).
COBS 11.6.12RRP
An investment manager that enters into arrangements under this section must make adequate prior disclosure to customers concerning the receipt of goods or services that relate to the execution of trades or the provision of research. This prior disclosure should form part of the summary form disclosure under the rule on inducements (COBS 2.3.1 R).
COBS 11.6.13GRP
The rule on prior disclosure of goods and services under this section complements the requirements on the disclosure of inducements (COBS 2.3.1 R (2)(b)). Investment managers should ensure they comply with both requirements where relevant.
COBS 11.6.14GRP
(1) The prior disclosure required by this section should include an adequate disclosure of the firm's policy relating to the receipt of goods or services that relate to the execution of trades or the provision of research in accordance with the rule on use of dealing commission (COBS 11.6.3 R).(2) The prior disclosure should explain generally why the firm might find it necessary or desirable to use dealing commission to purchase goods or services, bearing in mind the practices
COBS 11.6.15RRP
If an investment manager enters into arrangements in accordance with the rule on use of dealing commission (COBS 11.6.3 R), it must in a timely manner make adequate periodic disclosure to its customers of the arrangements entered into.
COBS 11.6.16RRP
Adequate prior and periodic disclosure under this section must include details of the goods or services that relate to the execution of trades and, wherever appropriate, separately identify the details of the goods or services that are attributable to the provision of research.
COBS 11.6.17GRP
In assessing the adequacy of prior and periodic disclosures made by an investment manager under this section, the FSA will have regard to the extent to which the investment manager adopts disclosure standards developed by industry associations such as the Investment Management Association, the National Association of Pension Funds and the London Investment Banking Association.
COBS 11.6.18ERP
(1) A firm will make periodic disclosure to its customers under this section in a timely manner if it is made at least once a year.(2) Compliance with (1) may be relied upon as tending to establish compliance with the rule on periodic disclosure (COBS 11.6.16 R).
COBS 11.6.19RRP
An investment manager must make a record of each prior and periodic disclosure it makes to its customers in accordance with this section and must maintain each such record for at least five years from the date on which it is provided.
COBS 9.6.1GRP
This section applies to a firm giving basic advice, which has chosen to comply with the rules in this section instead of the other rules in this chapter (see COBS 9.1.2 R).1
COBS 9.6.2RRP
A firm is permitted to maintain more than one range of stakeholder products.1
COBS 9.6.3RRP
A range of stakeholder products:1(1) may include more than one deposit-based stakeholder product;1(2) may include the stakeholder products of more than one stakeholder product provider;1(3) must not include any more than one:1(a) CISstakeholder product or linked life stakeholder product; or1(b) stakeholder CTF; or1(c) stakeholder pension scheme.1
COBS 9.6.4RRP
When a firm provides basic advice it must:1(1) explain why it chose the stakeholder products and stakeholder product providers that appear in the relevant range; and1(2) give the client a list of the stakeholder products and stakeholder product providers that appear in that range;1if the client asks it do so.1
COBS 9.6.5RRP
When a firm first has contact with a retail client with a view to giving basic advice on a stakeholder product, it must give the retail client:1(1) the basic advice initial disclosure information (COBS 9 Annex 1), in a durable medium, together with an explanation of that information, unless:1(a) it has already done so and the basic advice initial disclosure information is likely still to be accurate and appropriate; or1(b) the contact is not face to face and is using a means of
COBS 9.6.6GRP
(1) A firm may give a retail client the basic advice initial disclosure information (COBS 9 Annex 1) as part of :12(a) a services and costs disclosure document;2 or 1(b) a combined initial disclosure document if it has reasonable grounds to believe that it will provide services relating to a stakeholder product and a non-investment insurance contract, a regulated mortgage contract, an equity release transaction or a home purchase plan.1(2) If a firm provides a services and costs
COBS 9.6.7RRP
For the purposes of GEN 5, a firm may not use the Key facts logo in relation to any document that is designed to comply with rules in COBS 9.6 or COBS 7 unless it is a services and costs disclosure document or a2combined initial disclosure document produced in accordance with the templates and notes in the annexes to COBS 6.122
COBS 9.6.8RRP
If a firm's first contact with a retail client is not face to face, it must:1(1) inform the client at the outset:1(a) (if the communication is initiated by or on behalf of a firm), of the name of the firm and the commercial purpose of the communication;1(b) whether the firm will select from, or deal with, stakeholder products from a single provider, or from more than one provider;1(c) that the firm will provide the retail client with basic advice without carrying out a full assessment
COBS 9.6.9RRP
When a firm gives basic advice, it must do so using:1(1) a single range of stakeholder products; and1(2) a sales process that includes putting pre-scripted questions to the client.1
COBS 9.6.10RRP
When a firm gives basic advice it must not:1(1) describe or recommend a stakeholder product outside the firm'srange; or1(2) describe or recommend a smoothed linked long term stakeholder product; or1(3) describe fund choice, or recommend a particular fund, if a stakeholder product offers a choice of funds; or1(4) recommend the level of contributions required to be made to a stakeholder pension scheme to achieve a specific income in retirement; or1(5) recommend or agree that a client
COBS 9.6.11RRP
(1) If a firm starts the sales process for a stakeholder product that is not a deposit-based stakeholder product, it must not depart from that process unless it has advised the retail client that it will not provide basic advice on stakeholder products during the period of departure. A firm that does that must not provide basic advice during the departure period.1(2) Before a firm returns to the sales process for stakeholder products, it must tell the retail client that that process
COBS 9.6.12RRP
1A firm must only recommend a stakeholder product to a retail client if:(1) it has taken reasonable steps to assess the client's answers to the scripted questions and any other facts, circumstances or information disclosed by the client during the sales process;(2) (unless the relevant product is a deposit-based stakeholder product) having done so, it has reasonable grounds for believing that the stakeholder product is suitable for the client; and(3) the firm reasonably believes
COBS 9.6.13GRP
1COBS 9 Annex 2 gives guidance on the steps a firm could take to help it meet these suitability obligations.
COBS 9.6.14RRP
1If a firm giving basic advice recommends to a retail client to acquire a stakeholder product, it must ensure that, before the conclusion of the contract, its representative:(1) (unless the relevant product is a deposit-based stakeholder product) explains to the client, if necessary in summary form, but always in a way that will allow the client to make an informed decision about the firm's recommendation:(a) the nature of the stakeholder product; and(b) the "aims", "commitment"
COBS 9.6.15RRP
1Notwithstanding COBS 9.6.14R (2) a firm may provide the summary sheet (COBS 9.6.14R (2)) as soon as reasonably practicable after the conclusion of the contract if the client asks it to do so, or the contract will be concluded using a means of distance communication that does not enable the provision of the summary sheet in a durable medium before the conclusion of the contract, but only if the firm:(1) reads the summary sheet to the client before it concludes the contract; and(2)
COBS 9.6.16RRP
1If a firm concludes a contract for a stakeholder product with or for a retail client it must provide a copy of the completed questions and answers to the client in a durable medium as soon as reasonably practicable afterwards.
COBS 9.6.17RRP
(1) 1When a firm provides basic advice on a stakeholder product, it must not hold itself out as giving independent advice.(2) Nevertheless, a firm may still use the facilities and stationery it uses for other business in respect of which it does hold itself out as acting or advising independently.
COBS 9.6.18RRP
1A firm must ensure that none of its representatives:(1) is likely to be influenced by the structure of his or her remuneration to give unsuitable basic advice on stakeholder products to a retail client; or(2) refers a retail client to another firm in circumstances which would amount to the provision of any fee, commission or non-monetary benefit.
COBS 9.6.19RRP
1A firm must record that it has chosen to give basic advice to a retail client and make a record of the range used and the summary sheet (COBS 9.6.14R (2)) prepared for each retail client. That record must be retained for at least five years from the date of the relevant basic advice.
COBS 9.6.20RRP
(1) 1A firm must make an up-to-date record of:(a) its scope of basic advice, and the scope of basic advice used by its appointed representatives (if any); and(b) its range (or ranges) of stakeholder products, and the range (or ranges) used by its appointed representatives (if any).(2) Those records must be retained for five years from the date on which they are replaced by a more up-to-date record.
COBS 2.3.1RRP
A firm must not pay or accept any fee or commission, or provide or receive any non-monetary benefit, in relation to designated investment business or, in the case of its MiFID or equivalent third country business, another ancillary service, carried on for a client other than:(1) a fee, commission or non-monetary benefit paid or provided to or by the client or a person on behalf of the client; or(2) a fee, commission or non-monetary benefit paid or provided to or by a third party
COBS 2.3.2RRP
A firm will satisfy the disclosure obligation under this section if it:(1) discloses the essential arrangements relating to the fee, commission or non-monetary benefit in summary form;(2) undertakes to the client that further details will be disclosed on request; and(3) honours the undertaking in (2).[Note: article 26 of the MiFID implementing Directive]
COBS 2.3.3GRP
The obligation of a firm to act honestly, fairly and professionally in accordance with the best interests of its clients includes both the client's best interests rule and the duties under Principles 1 (integrity), 2 (skill, care and diligence) and 6 (customers' interests).
COBS 2.3.4GRP
1COBS 11.6 (Use of dealing commission) deals with the acceptance of certain inducements by investment managers and builds upon the requirements in this section. Investment managers should ensure they comply with this section and COBS 11.6.
COBS 2.3.5GRP
For the purposes of this section, a non-monetary benefit would include the direction or referral by a firm of an actual or potential item of designated investment business to another person, whether on its own initiative or on the instructions of an associate.
COBS 2.3.6GRP
For the purposes of this section, the receipt by an investment firm of a commission in connection with a personal recommendation or a general recommendation, in circumstances where the advice or recommendation is not biased as a result of the receipt of commission, should be considered as designed to enhance the quality of the recommendation to the client. [Note: recital 39 of MiFID implementing Directive]
COBS 2.3.7GRP
The fact that a fee, commission or non-monetary benefit is paid or provided to or by an appointed representative or, where applicable, by a tied agent,2 does not prevent the application of the rule on inducements.
COBS 2.3.8GRP
The rule on inducements is applicable to a firm and those acting on behalf of a firm in relation to the provision of an investment service or ancillary service to a client. Small gifts and minor hospitality received by an individual in their personal capacity below a level specified in the firm's conflict's of interest policy, will not be relevant for the purpose of the rule on inducements.
COBS 2.3.9GRP
1The following guidance and evidential provisions provide examples of arrangements the FSA believes will breach the client's best interests rule if it sells, personally recommends or arranges the sale of a packaged product for a retail client.
COBS 2.3.10ERP
(1) 1If a firm is required to disclose commission (see COBS 6.4) to a client in relation to the sale of a packaged product (other than in relation to arrangements between firms that are in the same immediate group) the firm should not enter into any of the following:(a) volume overrides, if commission paid in respect of several transactions is more than a simple multiple of the commission payable in respect of one transaction of the same kind; and(b) an agreement to indemnify
COBS 2.3.11GRP
(1) 1If a firm enters into an arrangement with another firm under which it makes or receives a payment of commission in relation to the sale of a packaged product that is increased in excess of the amount disclosed to the client, the firm is likely to have breached the rules on disclosure of charges, remuneration and commission (see COBS 6.4) and, where applicable, the rule on inducements in COBS 2.3.1R (2)(b), unless the increase is attributable to an increase in the premiums
COBS 2.3.12ERP
(1) 1This evidential provision applies in relation to a holding in, or the provision of credit to, a firm which holds itself out as making personal recommendations to retail clients on packaged products, except where the relevant transaction is between persons who are in the same immediate group.(2) A product provider should not take any step which would result in it:(a) having a direct or indirect holding of the capital or voting power of a firm in (1); or(b) providing credit
COBS 2.3.13GRP
1In considering the compliance of arrangements between members of the same immediate group with the rule on inducements (COBS 2.3.1 R), firms may wish to consider the evidential provisions in COBS 2.3.10 E and COBS 2.3.12 E, to the extent that these are relevant.
COBS 2.3.14GRP
(1) 1In relation to the sale of packaged products, the table on reasonable non-monetary benefits (COBS 2.3.15 G) indicates the kind of benefits which are capable of enhancing the quality of the service provided to a client and, depending on the circumstances, are capable of being paid or received without breaching the client's best interests rule. However, in each case, it will be a question of fact whether these conditions are satisfied. (2) The guidance in the table on reasonable
COBS 2.3.15GRP

1This table belongs to COBS 2.3.14 G.

Reasonable non-monetary benefits

Gifts, Hospitality and Promotional Competition Prizes

1

A product provider giving and a firm receiving gifts, hospitality and promotional competition prizes of a reasonable value.

Promotion

2

A product provider assisting another firm to promote its packaged products so that the quality of its service to clients is enhanced. Such assistance should not be of a kind or value that is likely to impair the recipient firm's ability to pay due regard to the interests of its clients, and to give advice on, and recommend, packaged products available from the recipient firm's whole range or ranges.

Joint marketing exercises

3

A product provider providing generic product literature (that is, letter heading, leaflets, forms and envelopes) that is suitable for use and distribution by or on behalf of another firm if:

(a)

the literature enhances the quality of the service to the client and is not primarily of promotional benefit to the product provider; and

(b)

the total costs (for example, packaging, posting, mailing lists) of distributing such literature to its client are borne by the recipient firm.

4

A product provider supplying another firm with 'freepost' envelopes, for forwarding such items as completed applications, medical reports or copy client agreements.

5

A product provider supplying product specific literature (for example, key features documents, minimum information) to another firm if:

(a)

the literature does not contain the name of any other firm; or

(b)

if the name of the recipient firm is included, the literature enhances the quality of the service to the client and is not primarily of promotional benefit to the recipient firm.

6

A product provider supplying draft articles, news items and financial promotions for publication in another firm's magazine, only if in each case any costs paid by the product provider for placing the articles and financial promotions are not more than market rate, and exclude distribution costs.

Seminars and conferences

7

A product provider taking part in a seminar organised by another firm or a third party and paying toward the cost of the seminar, if:

(a)

its participation is for a genuine business purpose; and

(b)

the contribution is reasonable and proportionate to its participation and by reference to the time and sessions at the seminar when its staff play an active role.

Technical services and information technology

8

A product provider supplying a 'freephone' link to which it is connected.

9

A product provider supplying another firm with any of the following:

(a)

quotations and projections relating to its packaged products5 and, in relation to specific investment transactions (or for the purpose of any scheme for review of past business), advice on the completion of forms or other documents;

(b)

access to data processing facilities, or access to data, that is related to the product provider's business;

(c)

access to third party electronic dealing or quotation systems that are related to the product provider's business; and

(d)

software that gives information about the product provider'spackaged products or which is appropriate to its business (for example, for use in a scheme for review of past business or for producing projections or technical product information).

10

A product provider paying cash amounts or giving other assistance to a firm not in the same immediate group for the development of software or other computer facilities necessary to operate software supplied by the product provider, but only to the extent that by doing so it will generate equivalent cost savings to itself or clients.

11

A product provider supplying another firm with information about sources of mortgage finance.

12

A product provider supplying another firm with generic technical information in writing, not necessarily related to the product provider's business, when this information states clearly and prominently that it is produced by the product provider or (if different) supplying firm.

Training

13

A product provider providing another firm with training facilities of any kind (for example, lectures, venue, written material and software).

Travel and accommodation expenses

14

A product provider reimbursing another firm's reasonable travel and accommodation expenses when the other firm:

(a)

participates in market research conducted by or for the product provider;

(b)

attends an annual national event of a United Kingdom trade association, hosted or co-hosted by the product provider;

(c)

participates in the product provider's training facilities (see 13);

(d)

visits the product provider'sUnited Kingdom office in order to:

(i)

receive information about the product provider's administrative systems; or

(ii)

attend a meeting with the product provider and an existing or prospective client of the receiving firm.

COBS 2.3.16GRP
1In interpreting the table of reasonable non-monetary benefits, product providers should be aware that where a benefit is made available to one firm and not another, this is more likely to impair compliance with the client's best interests rule.
COBS 2.3.17RRP
(1) A firm must make a record of the information disclosed to the client in accordance with COBS 2.3.1R (2)(b)4 and must keep that record for at least five years from the date on which it was given.4(2) A firm must also 4make a record of each benefit given to another firm which does not have to be disclosed to the client4in accordance with COBS 2.3.1R (2)(b)(ii),4 and must keep that record for at least five years from the date on which it was given.14 [Note: see article 51(3)
COBS 19.4.1RRP
In this section:(1) ‘intended retirement date’ means:(a) the date (according to the most recent recorded information available to the provider) when the scheme member intends to retire, or to bring the benefits in the scheme into payment, whichever is the earlier; or(b) if there is no such date, the scheme member's state pension age;(2) ‘open market option’ means the option to use the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity
COBS 19.4.2RRP
(1) If a retail client asks a firm for a retirement quotation more than four months before the client’s intended retirement date, the firm must give the client an open market option statement with or as part of its reply, unless the firm has given the client such a statement in the last 12 months.(2) If a firm does not receive such a request, it must provide a retail client with an open market option statement between four and six months before the client’s intended retirement
COBS 19.4.3RRP
The firm must:(1) remind the retail client about the open market option statement; and(2) tell the client what sum of money will be available to purchase an annuity on the open market;at least six weeks before the client’s intended retirement date.
COBS 19.4.4RRP
If a retail client with an open market option tells a firm that he is considering, or has decided:(1) to discontinue an income withdrawal arrangement; or(2) to take a further sum of money from his pension to buy an annuity as part of a phased retirement, the firm must give the client an open market option statement, unless the firm has given the client such a statement in the last 12 months.
COBS 18.5.1RRP
1This section applies to a firm which is an operator of a collective investment scheme.
COBS 18.5.2RRP

An operator when it is carrying on scheme management activity:

  1. (1)

    must comply with the COBSrules specified in the table, as modified by this section; and

  2. (2)

    need not comply with any other rule in COBS.

Table: Application of conduct of business rules

Application of conduct of business rules

Chapter, section or rule

Description

Modifications

1

Application

2.1.1

Acting honestly, fairly and professionally

2.3

Inducements

2.4

Agent as client and reliance on others

4.2.1 - 4.2.3

Fair, clear and not misleading communications

25.1

Distance communications

5.2

E-Commerce

11.2

Best execution

In the case of an unregulated collective investment scheme, COBS 18.5.4R (Modification of best execution) applies instead of COBS 11.2 in the circumstances set out in COBS 18.5.4R.1

11.3

Client order handling

11.5

Record keeping: client orders and decisions to deal

11.6

Use of dealing commission

311.8

Recording telephone conversations and electronic communications

18.5

Operators of collective investment schemes

COBS 18.5.3RRP
The COBSrules specified in the table in COBS 18.5.2 R apply to an operator when it is carrying on scheme management activity with the following modifications:(1) subject to (2), references to customer or client are to be construed as references to any scheme in respect of which the operator is acting or intends to act, and with or for the benefit of which the relevant activity is to be carried on;(2) in the case of an unregulated collective investment scheme, when an operator
COBS 18.5.4RRP
The best execution provisions applying to an operator of a collective investment scheme do not apply in relation to an unregulated collective investment scheme whose scheme documents include a statement that best execution does not apply in relation to the scheme and in which:(1) no participant is a retail client; or(2) no current participant in the scheme was a retail client on joining the scheme as a participant.
COBS 18.5.5RRP
An operator of an unregulated collective investment scheme must not accept a retail client asa participant in the scheme unless it has taken reasonable steps to offer and, if requested, provide to the potential participant scheme documents which adequately describe how the operation of the scheme is governed.
COBS 18.5.6GRP
An operator's scheme documents may consist of any number of documents provided that it is clear that collectively they constitute the scheme documents and provided the use of several documents in no way diminishes the significance of any of the statements which are required to be given to the potential participant.
COBS 18.5.7GRP
The scheme documents of an unregulated collective investment scheme (if they exist) should make it clear that if a participant is reclassified as a retail client, this reclassification will not affect certain scheme management activities of the operator of the scheme. In particular, despite such a reclassification, the operator will not be required to comply with the best execution provisions applying to an operator of a collective investment scheme. It should be noted that there
COBS 18.5.8RRP
Where the scheme is an unregulated collective investment scheme and no current participant in the scheme was a retail client on joining the scheme as a participant, the scheme documents must include a statement that:(1) explains that if a participant is reclassified as a retail client subsequent to joining the scheme as a participant, then the operator may continue to treat all participants in the scheme as though they were not retail clients; (2) explains that if a participant
COBS 18.5.9GRP
The operator will still have to comply with other COBS provisions as a result of the reclassification of a participant as a retail client, for example, the requirement to provide periodic statements to participants who are retail clients in an unregulated collective investment scheme (see the rule on periodic statements for an unregulated collective investment scheme (COBS 18.5.11)).
COBS 18.5.10ERP
  1. (1)

    In order to provide adequate information to describe how the operation of the scheme is governed, an operator of an unregulated collective investment scheme should include in the scheme documents a provision about each of the items of relevant information set out in the following table (Content of scheme documents).

  2. (2)

    Compliance with (1) may be relied on as tending to establish compliance with COBS 18.5.5 R.

  3. (3)

    Contravention of (1) may be relied on as tending to establish contravention of COBS 18.5.5 R.

Table: Content of scheme documents

Content of scheme documents

The scheme documents should include provision about:

(1)

Regulator

The firm statutory status in accordance with GEN 4 Annex 1 R (Statutory status disclosure);

(2)

Services

the nature of the services that the operator will provide in relation to the scheme;

(3)

Payments for services

details of any payment for services payable by the scheme or from the property of the scheme or participants in the scheme to the operator, including where appropriate:

(a)

the basis of calculation;

(b)

how it is to be paid and collected;

(c)

how frequently it is to be paid; and

(d)

whether or not any other payment is receivable by the operator (or to its knowledge by any of its associates) in connection with any transactions effected by the operator with or for the scheme, in addition to or in lieu of any fees;

(4)

Commencement

when and how the operator is appointed;

(5)

Accounting

the arrangements for accounting to the scheme or participants in the scheme for any transaction effected;

(6)

Termination method

how the appointment of the operator may be terminated;

(7)

Complaints procedure

how to complain to the operator and a statement that the participants in the scheme may subsequently complain direct to the Financial Ombudsman Service;

(8)

Compensation

whether or not compensation may be available from the compensation scheme should the operator be unable to meet its liabilities, and information about any other applicable compensation scheme; and, for each applicable scheme, the extent and level of cover and how further information can be obtained;

(9)

Investment objectives

the investment objectives for the portfolio of the scheme;

(10)

Restrictions

(a)

any restrictions on:

(i)

the types of investments or property which may be included in the portfolio of the scheme;

(ii)

the markets on which investments or property may be acquired for the portfolio of the scheme;

(iii)

the amount or value of any one investment or asset, or on the proportion of the portfolio of the scheme which any one investment or asset or any particular kind of investment or asset may constitute; or

(b)

that there are no such restrictions;

(11)

Holding scheme assets

(a)

if it is the case, that the operator will:

(i)

hold money on behalf of the scheme or be the custodian of investments or other property of the scheme; or

(ii)

arrange for some other person to act in either capacity and, if so, whether that person is an associate of the operator identifying that person and describing the nature of any association; and

(b)

in either case:

(i)

how any money is to be deposited;

(ii)

the arrangements for recording and separately identifying registrable investments of the scheme and, where the registered holder is the operator's own nominee, that the operator will be responsible for the acts and omissions of that person;

(iii)

the extent to which the operator accepts liability for any loss of the investment of the scheme;

(iv)

the extent to which the operator or any other person mentioned in (11)(a)(ii), may hold a lien or security interest over investments of the scheme;

(v)

where investments of the scheme will be registered collectively in the same name, a statement that the entitlements of the scheme may not be identifiable by separate certificates or other physical documents of title, and that, should the operator default, any shortfall in investments of the scheme registered in that name may be shared proportionately among all schemes and any other customers of the operator whose investments are so registered;

(vi)

whether or not investments or other property of the scheme can be lent to, or deposited by way of collateral with, a third party and whether or not money can be borrowed on behalf of the scheme against the security of those investments or property and, if so, the terms upon which they may be lent or deposited;

(vii)

the arrangements for accounting to the scheme for investments of the scheme, for income received (including any interest on money and any income earned by lending investments or other property) of the scheme, and for rights conferred in respect of investments or other property of the scheme;

(viii)

the arrangements for determining the exercise of any voting rights conferred by investments of the scheme; and

(ix)

where investments of the scheme may be held by an eligible custodian outside the United Kingdom, a general statement that different settlement, legal and regulatory requirements, and different practices relating to the segregation of those investments, may apply;

(12)

Clients' money outside the United Kingdom

if it is the case, that the operator may hold the money of the scheme in a client bank account outside the United Kingdom;

(13)

Exchange rates

if a liability of the scheme in one currency is to be matched by an asset in a different currency, or if the services to be provided to the operator for the scheme may relate to an investment denominated in a currency other than the currency in which the investments of the scheme are valued, a warning that a movement of exchange rates may have a separate effect, unfavourable or favourable, on the gain or loss otherwise made on the investments of the scheme;

(14)

Stabilised investments

if it is the case, that the operator is to have the right under the schemedocuments to effect transactions in investments the prices of which may be the subject of stabilisation;

(15)

Conflict of interest and material interest

if it is the case, that the operator is to have the right under the agreement or instrument constituting the scheme to effect transactions on behalf of the scheme in which the operator has directly or indirectly a material interest (except for an interest arising solely from the participation of the operator as agent for the scheme), or a relationship of any description with another party which may involve a conflict with the operator's duty to the scheme, together with a disclosure of the nature of the interest or relationship;

(16)

Use of dealing commission

if the operator receives goods or services in addition to the execution of its customer orders in accordance with the section on the use of dealing commission, the prior disclosure required by the rule on prior disclosure (see COBS 11.6.2 R);

(17)

Acting as principal

if it is the case, that the operator may act as principal in a transaction with the scheme;

(18)

Stock lending

if it is the case, that the operator may undertake stock lending activity with or for the scheme specifying the type of assets of the scheme to be lent, the type and value of relevant collateral from the borrower and the method and amount of payment due to the scheme in respect of the lending;

(19)

Transactions involving contingent liability investments

(a)

if it is the case, that the agreement or instrument constituting the scheme allows the operator to effect transactions involving contingent liability investments for the account of the portfolio of the scheme;

(b)

if applicable, whether there are any limits on the amount to be committed by way of margin and, if so, what those limits are; and

(c)

if applicable, that the operator has the authority to effect transactions involving contingent liability investments otherwise than under the rules of a recognised investment exchange or designated investment exchange and in a contract traded thereon;

(20)

Periodic statements

(a)

the frequency of any periodic statement (this should not be less than once every 12 months) except where a periodic statement is not required (see COBS 18.5.13R); and

(b)

whether those statements will include some measure of performance, and, if so, what the basis of that measurement will be;

(21)

Valuation

the bases on which assets comprised in the portfolio of the scheme are to be valued;

(22)

Borrowings

if it is the case, that the operator may supplement the funds in the portfolio of the scheme and, if it may do so:

(a)

the circumstances in which the operator may do so;

(b)

whether there are any limits on the extent to which the operator may do so and, if so, what those limits are; and

(c)

any circumstances in which such limits may be exceeded;

(23)

Underwriting commitments

if it is the case, that the operator may for the account of the portfolio of the scheme underwrite or sub-underwrite any issue or offer for sale of securities, and:

(a)

whether there are any restrictions on the categories of securities which may be underwritten and, if so, what these restrictions are; and

(b)

whether there are any financial limits on the extent of the underwriting and, if so, what these limits are;

(24)

Investments in other collective investment schemes

whether or not the portfolio may contain units in a collective investment scheme either operated or advised by the operator or by an associate of the operator or in a collective investment scheme which is not a regulated collective investment scheme;

(25)

Investments in securities underwritten by the operator

whether or not the portfolio may contain securities of which any issue or offer for sale was underwritten, managed or arranged by the operator or by an associate of the operator during the preceding 12 months.
COBS 18.5.11RRP
An operator of an unregulated collective investment scheme must, subject to the exceptions from the requirement to provide a periodic statement, provide to participants in the scheme, promptly and at suitable intervals, a statement in a durable medium which contains adequate information on the value and composition of the portfolio of the scheme at the beginning and end of the period of the statement.
COBS 18.5.12ERP
(1) An operator should act in accordance with the provisions in the right hand column of the periodic statements table (see COBS 18.5.15E) to fulfil the requirement to prepare and issue periodic statements indicated in the left hand column against these provisions.(2) Compliance with (1) may be relied on as tending to establish compliance with the requirement to prepare and issue periodic statements.(3) Contravention of (1) may be relied on as tending to establish contravention
COBS 18.5.13RRP
(1) An operator of an unregulated collective investment scheme need not provide a periodic statement:(a) (i) to a participant in the scheme who is a retail client ordinarily resident outside the United Kingdom; or(ii) to a participant in the scheme who is a professional client; if the participant has so requested or the operator has taken reasonable steps to establish that the participant does not wish to receive it; or(b) if it would duplicate a statement to be provided by someone
COBS 18.5.14RRP
An operator of an unregulated collective investment scheme must make a copy of any periodic statement it has provided in accordance with the requirement to prepare and issue periodic statements to participants in the scheme. The record must be retained for a minimum period of three years.
COBS 18.5.15ERP

Table: Periodic statements

This table belongs to COBS 18.5.12 E.

Periodic statements

Suitable intervals

(1)

A periodic statement should be provided at least:

(a)

six-monthly; or

(b)

once in any other period, not exceeding 12 months, which has been mutually agreed between the operator and the participant in the scheme.

Adequate information

(2)

(a)

A periodic statement should contain:

(i)

(A)

The information set out in the table of general contents of a periodic statement;

(B)

where the portfolio of the scheme includes uncovered open positions in contingent liability investments, the additional information in the table listing the contents of a periodic statement (see COBS 18.5.15E) in respect of contingent liability investments; or

(ii)

such information as a participant who is a retail client ordinarily resident outside the United Kingdom, or a professional client, has on his own initiative agreed with the operator as adequate.

(b)

For a firm acting as an outgoing ECA provider, the words 'United Kingdom' is replaced by 'EEA'
COBS 18.5.16GRP
Examples of uncovered open positions include:(1) selling a call option on an investment not held in the portfolio;(2) unsettled sales of call options on currency in amounts greater than the portfolio's holding of that currency in cash or in readily realisable investments denominated in that currency; and (3) transactions having the effect of selling an index to an amount greater than the portfolio's holdings of investments included in that index.
COBS 18.5.17ERP

Table: General contents of a periodic statement

This table belongs to COBS 18.5.15 E.

General contents of periodic statements

1

Contents and value

(a)

As at the beginning of the account period, the total value of the portfolio of the scheme, being either:

(i)

the value of the assets comprised in the portfolio on the date as at which the statement provided for the immediately preceding period of account is made up; or

(ii)

in the case of the first periodic statement, the value of the assets comprised in the portfolio on the date on which the operator assumed responsibility for the management of the portfolio.

(b)

As at the end of the account period:

(i)

the number, description and value of each investment held on behalf of the scheme;

(ii)

the amount of cash held on behalf of the scheme; and

(iii)

the total value of the portfolio of the scheme.

2

Basis of valuation

A statement of the basis on which the value of each investment has been calculated and, if applicable, a statement that the basis for valuing a particular investment has changed since the previous periodic statement. Where any investments are shown in a currency other than the usual one used for valuation of the portfolio of the scheme, the relevant currency exchange rates must be shown.

3

Details of any assets loaned or charged

(a)

A summary of those investments (if any) which were, at the closing date, loaned to any third party and those investments (if any) that were at that date charged to secure borrowings made on behalf of the portfolio of the scheme; and

(b)

the aggregate of any interest payments made and income received during the account period in respect of loans or borrowings made during the period.

4

Transactions and changes in composition

Except in the case of a portfolio which aims to track the performance of an external index:

(a)

a statement that summarises the transactions entered into for the portfolio of the scheme during the period; and

(b)

the aggregate of money and a summary of all investments transferred into and out of the portfolio of the scheme during the period; and

(c)

the aggregate of any interest payments, dividends and other benefits received by the operator for the portfolio of the scheme during that period.

5

Charges and remuneration

If not previously advised in writing, a statement for the account period:

(a)

of the aggregate charges of the operator and its associates; and

(b)

of any remuneration received by the operator or its associates or both from a third party in respect of the transactions entered into, or any other services provided, for the portfolio of the scheme.

6

Movement in value of portfolio

A statement of the difference between the value of the portfolio at the closing date and its value at the starting date of the account period, having regard at least, during the account period, to the following:

(a)

the aggregate of assets received from participants of the scheme and added to the portfolio of the scheme;

(b)

the aggregate of the value of assets transferred, or of amounts paid, to the scheme;

(c)

the aggregate income received on behalf of the scheme in respect of the portfolio; and

(d)

the aggregate of realised and unrealised profits or gains and losses attributable to the assets comprised in the portfolio of the scheme.

Notes:

For the purposes of Item 1, where the scheme is a property enterprise trust, it will be sufficient for the periodic statement to disclose the number of properties held in successive valuation bands where this is appropriate to the size and composition of the scheme, rather than the value of each asset in the portfolio. The valuation bands of over £10m, £5-£10m, £2.5-£5m, £1-£2.5m and under £1m would be appropriate, unless an operator could show that different bands were justifiable in the circumstances.

The statement to be provided under Item 6 is not intended to be an indicator of the performance of the portfolio of the scheme.An operator may wish to distinguish capital and income, and thereby provide more information than referred to in this table. If the statement includes some measure of performance, the basis of measurement should be stated.
COBS 18.5.18ERP

Table: Contents of a periodic statement in respect of contingent liability investments

This table belongs to COBS 18.5.15 E.

Contents of a periodic statement in respect of contingent liability investments

(1)

Changes in value

The aggregate of money transferred into and out of the portfolio of the scheme during the account period.

(2)

Open positions

In relation to each open position in the portfolio of the scheme at the end of the account period, the unrealised profit or loss to the portfolio of the scheme (before deducting or adding any commission which would be payable on closing out).

(3)

Closed positions

In relation to each transaction effected during the account period to close out a position of the scheme, the resulting profit or loss to the portfolio of the scheme after deducting or adding any commission.

(Instead of the specific detail required by Items 2 or 3, the statement may show the net profit or loss in respect of the overall position of the scheme in each contract)

(4)

Aggregate of contents

The aggregate of each of the following in, or relating to, the portfolio of the scheme at the close of business on the valuation date:

(a)

cash;

(b)

collateral value;

(c)

management fees; and

(d)

commissions attributable to transactions during the period or a statement that this information has been separately disclosed in writing on earlier statements or confirmations to the participant.

(5)

Option account valuations

In respect of each open option comprising the portfolio of the scheme on the valuation date:

(a)

the share, future, index or other investment or asset involved;

(b)

(unless the valuation statement follows the statement for the period in which the option was opened) the trade price and date for the opening transaction;

(c)

the market price of the contract; and

(d)

the exercise price of the contract.

Options account valuations may show an average trade price and market price in respect of an option series where a number of contracts within the same series have been purchased on behalf of the scheme.
COBS 5.1.-1RRP
3(1) This section applies to a firm that carries on any distance marketing activity from an establishment in the United Kingdom, with or for a consumer in the United Kingdom or another EEA State.3(2) If a firm is an intermediary rather than the supplier under the distance contract, references to 'firm' in COBS 5 Annex 1 R and COBS 5 Annex 2 R are to be interpreted as referring to the supplier except for references to 'firm' in COBS 5 Annex 1 R (2), (4) and (18).3
COBS 5.1.1RRP
1A firm must provide a consumer with the distance marketing information (COBS 5 Annex 1R ) in good time before the consumer is bound by a distance contract or offer. [Note: article 3(1) of the Distance Marketing Directive]
COBS 5.1.2RRP
A firm must ensure that the distance marketing information, the commercial purpose of which must be made clear, is provided in a clear and comprehensible manner in any way appropriate to the means of distance communication used, with due regard, in particular, to the principles of good faith in commercial transactions, and the legal principles governing the protection of those who are unable to give their consent, such as minors. [Note: article 3(2) of the Distance Marketing
COBS 5.1.3RRP
When a firm makes a voice telephony communication to a consumer, it must make its identity and the purpose of its call explicitly clear at the beginning of the conversation. [Note: article 3(3)(a) of the Distance Marketing Directive]
COBS 5.1.4RRP
A firm must ensure that information on contractual obligations to be communicated to a consumer during the pre-contractual phase is in conformity with the contractual obligations which would result from the law presumed to be applicable to the distance contract if that contract is concluded. [Note: article 3(4) of the Distance Marketing Directive]
COBS 5.1.5RRP
A firm must communicate to the consumer all the contractual terms and conditions and the information referred to in the distance marketing disclosure rules (COBS 5.1.1 R to COBS 5.1.4 R) on a durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer. [Note: article 5(1) of the Distance Marketing Directive]
COBS 5.1.6GRP
A firm will provide information, or communicate contractual terms and conditions, to a consumer if another person provides the information, or communicates the terms and conditions, to the consumer on its behalf.
COBS 5.1.7RRP
This section does not apply to a distance contract to deal as agent, advise or arrange, if the distance contract is concluded merely as a stage in the provision of another service by the firm or another person. [Note: recital 19 to the Distance Marketing Directive]
COBS 5.1.8RRP
In the case of a distance contract comprising an initial service agreement, followed by successive operations or a series of separate operations of the same nature performed over time, the rules in this section only apply to the initial agreement. [Note: article 1(2) of the Distance Marketing Directive]
COBS 5.1.9RRP
If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the distance marketing disclosure rules (COBS 5.1.1 R to COBS 5.1.4 R) will only apply: (1) when the first operation is performed; and(2) if no operation of the same nature is performed for more than a year, when the next operation is performed (the next operation being deemed the first in a new
COBS 5.1.10GRP
In this section:(1) 'initial service agreement' includes the opening of a bank account and the concluding of a portfolio management contract;(2) 'operations' includes transactions made within the framework of a portfolio management contract; and5(3) adding new elements to an initial service agreement, such as the ability to use an electronic payment instrument together with one's existing bank account, does not constitute an 'operation' but an additional contract to which the
COBS 5.1.11GRP
In the FSA's view, other examples of:(1) 'initial service agreement' include:(a) subscribing to an investment trust savings scheme; or(b) concluding a life policy, personal pension scheme or stakeholder pension scheme that includes a pre-selected option providing for future increases or decreases in regular premiums or payments; and(2) 'operations' include:(a) successive purchases or sales of shares under an investment trust savings scheme; and(b) subsequent index-linked changes
COBS 5.1.12RRP
In the case of a voice telephony communication, and subject to the explicit consent of the consumer, only the abbreviated distance marketing information (COBS 5 Annex 2R ) needs to be provided during that communication. However, a firm must still provide the distance marketing information (COBS 5 Annex 1R ) on a durable medium available and accessible to the consumer in good time before the consumer is bound by any distance contract or offer, unless another exception applies.
COBS 5.1.13RRP
A firm may provide the distance marketing information (COBS 5 Annex 1R ) and the contractual terms and conditions in a durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a consumer's request using a means of distance communication that does not enable the provision of that information in that form in good time before the consumer is bound by any distance contract or offer. [Note: article 5(2) of the Distance Marketing
COBS 5.1.13ARRP
4Where a distance contract is also a contract for payment services to which the Payment Services Regulations apply, a firm is required to provide to the consumer only the information specified in rows 7 to 12, 15, 16 and 20 of COBS 5 Annex 1 R. [Note: article 4(5) of the Distance Marketing Directive]
COBS 5.1.13BGRP
4Where a distance contract covers both payment services and non-payment services, this exception applies only to the payment services aspects of the contract. A firm taking advantage of this exception will need to comply with the information requirements in Part 5 of the Payment Services Regulations.
COBS 5.1.14RRP
If, at any time during the contractual relationship, a consumer that is a party to a distance contract asks a firm:(1) for a paper copy of the terms and conditions of that contract; or(2) to change the means of distance communication used;the firm must provide that paper copy or change the means of distance communication used, unless (in the latter case) that would be incompatible with the contract or the nature of the service provided. [Note: article 5(3) of the Distance Marketing
COBS 5.1.15RRP
(1) A firm must not enforce, or seek to enforce, any obligations under a distance contract against a consumer, in the event of an unsolicited supply of services, the absence of reply not constituting consent.(2) This rule does not apply to the tacit renewal of a distance contract. [Note: article 9 of the Distance Marketing Directive]
COBS 5.1.16RRP
If a consumer purports to waive any of the consumer's rights created or implied by the rules in this section, a firm must not accept that waiver, nor seek to rely on or enforce it against the consumer. [Note: article 12 of the Distance Marketing Directive]
COBS 5.1.17RRP
If a firm proposes to enter into a distance contract with a consumer that will be governed by the law of a country outside the EEA, the firm must ensure that the consumer will not lose the protection created by the rules in this section if the distance contract has a close link with the territory of one or more EEA States. [Note: articles 12 and 16 of the Distance Marketing Directive]
COBS 14.2.1RRP
1A firm that sells:(1) a packaged product to a retail client, must provide a key features document and a key features illustration2 to that client (unless the packaged product is a unit in a simplified prospectus scheme or an EEA simplified prospectus scheme);(2) a life policy that is not a reinsurance contract to a client, must provide the Consolidated Life Directive information to that client;(3) the variation of a life policy or personal pension scheme to a retail client,
COBS 14.2.2RRP
The documents or information required to be provided or offered by the first provision rule (COBS 14.2.1 R) must be in a durable medium or made available on a website (where that does not constitute a durable medium) that meets the website conditions.
COBS 14.2.3RRP
(1) A firm that personally recommends that a retail client holds a particular asset in a SIPP must provide that client with sufficient information for the client to be able to make an informed decision about whether to buy or invest.(2) This rule does not apply if the asset is described in COBS 14.2.1 R.
COBS 14.2.4RRP
When a firm provides a document or information in accordance with the rules in this section, it must not do anything that might reasonably cause a retail client to be mistaken about the identity of the firm that has produced, or will produce, the product.
COBS 14.2.5RRP
A firm is not required to provide:(1) a document, if the firm produces the product and the rules in this section require another firm to provide the document;(2) a key features document or key features illustration2, if another person is required to provide the distance marketing information by the rules of another EEA State; (3) the Consolidated Life Directive information, if another person is required to provide that information by the rules of another EEA State;(4) a simplified
COBS 14.2.6RRP
2A firm is not required to provide a key features illustration for a product if the information that would have been included in that illustration is included in the key features document provided to the client. 2
COBS 14.2.7RRP
A firm is not required to provide a key features document or a key features illustration2for: (1) a key features scheme if it provides a simplified prospectus instead;(2) a life policy that is not a reinsurance contract if:(a) the firm is operating from an establishment in another EEA State and the sale is by distance contract; or(b) the client is habitually resident outside the United Kingdom and the sale is not by distance contract.(3) a traded life policy.[Note: in respect
COBS 14.2.8RRP
A firm is not required to provide a key features document or a key features illustration2, if:(1) the client is buying or investing in response to a direct offer financial promotion without receiving a personal recommendation to buy or invest; and(2) the firm provides materially the same information in some other way.
COBS 14.2.9RRP
A firm is not required to provide a , a key features illustration2 or a simplified prospectus for a key features scheme or simplified prospectus scheme if:(1) the client is habitually resident outside the EEA and not present in the EEA when the relevant application is signed; or(2) the purchase is by a discretionary investment manager on behalf of a retail client; or(3) the sale is arranged or personally recommended by an investment manager and the client has agreed that a key
COBS 14.2.10GRP
Although a firm is not always required to provide a simplified prospectus to a client (COBS 14.2.9 R), the obligation to offer the prospectus to the client (COBS 14.2.1R (5)) remains.
COBS 14.2.11RRP
A firm may provide a single document, which describes more than one key features scheme, simplified prospectus scheme or EEA simplified prospectus scheme, or any combination of those schemes, if:(1) the schemes are offered through a funds supermarket service;(2) the document clearly describes the difference between the relevant schemes; and(3) (in the case of a simplified prospectus scheme or an EEA simplified prospectus scheme) the firm also offers copies of the relevant prospectuses
COBS 14.2.12RRP
In the case of a distance contract comprising an initial service agreement, followed by successive operations or a series of separate operations of the same nature performed over time, the rules in this section only apply to the initial agreement.
COBS 14.2.13RRP
If there is no initial service agreement but the successive operations or separate operations of the same nature performed over time are performed between the same contractual parties, the rules in this section only apply:(1) when the first operation is performed; and(2) if no operation of the same nature is performed for more than a year, when the next operation is performed (the next operation being deemed to be the first in a new series of operations).
COBS 14.2.14RRP
When the rules in this section require a firm to:(1) offer a simplified prospectus or an EEA simplified prospectus to a client, that prospectus must be offered free of charge before the conclusion of the contract; or(2) provide a key features document, a simplified prospectus, an EEA simplified prospectus or any other document or information to a client, the document or information must be provided free of charge and in good time before the firm carries on the relevant business.[Note:
COBS 14.2.15RRP
A key features document for an HMRC allocated CTF must be provided as soon as reasonably possible after the CTF has been opened.
COBS 14.2.16RRP
A firm may provide a document, or the information required to be provided by the rules in this section, in a durable medium immediately after the conclusion of a distance contract, if the contract has been concluded at a client's request using a means of distance communication that does not enable the document or information to be provided in that form in good time before the client is bound by the contract.
COBS 14.2.17RRP
Where the rules in this section require a document or information to be provided, in the case of a voice telephony communication, a firm must:(1) if the client gives explicit consent to receiving only limited information, provide the abbreviated distance marketing disclosure information(COBS 5 Annex 2 R)3 orally to the client;3(2) if the client does not give explicit consent to only receiving limited information, and the parties wish to proceed by voice telephony communication,
COBS 21.3.1RRP
An insurer must not contract to provide benefits under linked long-term contracts of insurance that are determined:(1) wholly or partly, or directly or indirectly, by reference to fluctuations in any index other than an approved index;(2) wholly or partly by reference to the value of, or the income from, or fluctuations in the value of, property other than any of the following:(a) approved securities;(b) listed securities; (c) permitted unlisted securities; (d) permitted land
COBS 21.3.2GRP
Nothing in these rules prevents a firm making allowance in the value of any permitted link for any notional tax loss associated with the relevant linked assets for the purposes of fair pricing.
COBS 6.3.1RRP
1This section applies to a firm which makes a personal recommendation to, deals in investments as agent for, or arranges for, a retail client in relation to a packaged product.
COBS 6.3.2RRP
This section does not apply to a firm giving basic advice where the firm follows the basic advicerules in COBS 9.6.3
COBS 6.3.3GRP
(1) The rules referred to in (4) are derived from the Single Market directives and the Distance Marketing Directive. In the FSA's opinion, a firm may3 comply with them by ensuring3 that in good time before:333(a) a retail client is bound by an agreement for the provision of a personal recommendation on packaged products; or (b) the firm performs an act preparatory to the provision of a personal recommendation;(c) (3in relation to the amendment of a life policy for that retail
COBS 6.3.4RRP
For the purposes of GEN 5, a firm may not use the Key facts logo in relation to any document that is designed to comply with rules in COBS 5, 6.1 or COBS 7 unless it is a services and costs disclosure document or a 3combined initial disclosure document produced in accordance with the templates and Notes in the annexes to this chapter. 33
COBS 6.3.5GRP
Each of the services and costs disclosure document and3combined initial disclosure document that a firm provides to a client should be documents which the firm reasonably considers will be, or are likely to be, appropriate for the client having regard to the type of service which the firm may provide or business which the firm may conduct. 33
COBS 6.3.6GRP
(1) A firm will satisfy the requirements as to timing in the rules referred to in COBS 6.3.3G (4) if its representative provides information to the client on first making contact with the client.23(2) [deleted]323
COBS 6.3.7GRP
(1) A services and costs disclosure document3 is a document that contains the Key facts logo, headings and text in the order shown in COBS 6 Annex 1 and in accordance with the Notes.3(2) A combined initial disclosure document is a document that contains the Key facts logo, headings and text in the order shown in COBS 6 Annex 2 and in accordance with the Notes.
COBS 6.3.8GRP
A firm may include, in a services and costs disclosure document or a combined initial disclosure document,3 information required by COBS or by the rule on disclosing a tied agent's capacity (SUP 12.6.13 R) and which is not in the template for the services and costs disclosure document or combined initial disclosure document,3if the information would be sufficiently prominent. For example, a firm may wish to use those documents to satisfy:333333(1) the parts of the rule on information
COBS 6.3.9GRP
Firms can obtain from the FSA website http://www.fsa.gov.uk a specimen of the services and costs disclosure document and the combined initial disclosure document.3 A firm may produce its services and costs disclosure document or combined initial disclosure document3by using its own house style and brand. Electronic tools to help firms to construct their own versions of these documents 3 are available from the FSA website.3333
COBS 6.3.14GRP
A firm would be unlikely to comply with the client's best interests rule and the fair, clear and not misleading rule, 3if:33(1) the services and costs disclosure document or the combined initial disclosure document that it provided initially did not reflect relevantexpected commission arrangements; or3(2) the firm arranged to retain any commission which exceeded the amount or rate disclosed without first providing further appropriate inducements information and obtaining the client's
COBS 6.3.19GRP
In cases where firms make initial contact with a client on the telephone a firm may, in addition, have to take into account and comply with the requirements in this sourcebook applicable to the conclusion of distance contracts3 (see COBS 5). 3
COBS 6.3.20GRP
(1) In accordance with the rule on information disclosure before providing services (COBS 2.2.1 R), if a firm's initial contact with a retail client with a view to providing a personal recommendation on packaged products is by telephone then the following information should be provided before proceeding further:(a) the name of the firm and, if the call is initiated by or on behalf of a firm, the commercial purpose of the call;(b) whether the firm offers packaged products3 from
COBS 6.3.21RRP
A firm must take reasonable steps to ensure that its representatives when making contact with an employee with a view to giving a personal recommendation on his employer's group personal pension scheme or stakeholder pension scheme, inform the employer:(1) that the firm will be providing a personal recommendation on group personal pension schemes and/or stakeholder pension schemes provided by the employer;(2) whether the employee will be provided with a personal recommendation
COBS 19.1.1RRP
1If an individual who is not a pension transfer specialist gives a personal recommendation about a pension transfer or pension opt-out on a firm's behalf, the firm must ensure that the recommendation is checked by a pension transfer specialist.
COBS 19.1.2RRP
A firm must: (1) compare the benefits likely (on reasonable assumptions) to be paid under a defined benefits pension scheme with the benefits afforded by a personal pension scheme or stakeholder pension scheme , before it advises a retail client to transfer out of a defined benefits pension scheme;(2) ensure that that comparison includes enough information for the client to be able to make an informed decision;(3) give the client a copy of the comparison, drawing the client's
COBS 19.1.3GRP
In particular, the comparison should: (1) take into account all of the retail client's relevant circumstances;(2) have regard to the benefits and options available under the ceding scheme and the effect of replacing them with the benefits and options under the proposed scheme; and(3) explain the assumptions on which it is based and the rates of return that would have to be achieved to replicate the benefits being given up.
COBS 19.1.4RRP

When a firm compares the benefits likely to be paid under a defined benefits pension scheme with the benefits afforded by a personal pension scheme or stakeholder pension scheme (COBS 19.1.2R (1)), it must:

  1. (1)

    assume that:

    (a) the annuity interest rate is the intermediate rate of return appropriate for a level or fixed rate of increase annuity in (2COBS 13 Annex 2 3.1R(6))2) or the rate for annuities in payment (if less)

    (b) the retail prices index is

    2.5%

    (c) the average earnings index and the rate for section 21 orders is

    4.0%

    (d) the pre-retirement limited price indexation revaluation is

    2.5%

    (e) the post-retirement limited price increases at

    2.5%

    (f) the index linked pensions rate is the intermediate rate of return in 2COBS 13 Annex 2 3.1 R (6)2 for annuities linked to the retail prices index;

    or use more cautious assumptions;

  2. (2)

    calculate the interest rate in deferment; and

  3. (3)

    have regard to benefits which commence at difference times.

COBS 19.1.5RRP
If a firm arranges a pension transfer or pension opt-out for a retail client as an execution-only transaction, the firm must make, and retain indefinitely, a clear record of the fact that no personal recommendation was given to that client.
COBS 19.1.6GRP
When advising a retail client who is, or is eligible to be, a member of a defined benefits occupational pension scheme whether to transfer or opt-out, a firm should start by assuming that a transfer or opt-out will not be suitable. A firm should only then consider a transfer or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer or opt-out is in the client's best interests.
COBS 19.1.7GRP
When a firm advises a retail client on a pension transfer or pension opt-out, it should consider the client’s attitude to risk in relation to the rate of investment growth that would have to be achieved to replicate the benefits being given up.
COBS 19.1.8GRP
When a firm prepares a suitability report it should include:(1) a summary of the advantages and disadvantages of its personal recommendation;(2) an analysis of the financial implications (if the recommendation is to opt-out); and(3) a summary of any other material information.
COBS 19.1.9GRP
If a firm proposes to advise a retail client not to proceed with a pension transfer or pension opt-out, it should give that advice in writing.
COBS 14.3.1RRP
This section applies to a firm in relation to:(1) MiFID or equivalent third country business; and(2) the following regulated activities when carried on for a retail client:(a) making a personal recommendation about a designated investment; or(b) managing investments that are designated investments; or(c) arranging (bringing about) or executing a deal in a warrant or derivative; or(d) engaging in stock lending activity.
COBS 14.3.2RRP
A firm must provide a client with a general description of the nature and risks of designated investments, taking into account, in particular, the client's categorisation as a retail client or a professional client. That description must:(1) explain the nature of the specific type of designated investment concerned, as well as the risks particular to that specific type of designated investment, in sufficient detail to enable the client to take investment decisions on an informed
COBS 14.3.3RRP
If a firm provides a retail client with information about a designated investment that is the subject of a current offer to the public and a prospectus has been published in connection with that offer in accordance with the Prospectus Directive, that firm must inform the retail client where that prospectus is made available to the public. [Note: article 31(3) of the MiFID implementing Directive]
COBS 14.3.4RRP
Where the risks associated with a designated investment composed of two or more different designated investments or services are likely to be greater than the risks associated with any of the components, a firm must provide an adequate description of the components of that designated investment and the way in which its interaction increases the risks. [Note: article 31(4) of the MiFID implementing Directive]
COBS 14.3.5RRP
In the case of a designated investment that incorporates a guarantee by a third party, the information about the guarantee must include sufficient detail about the guarantor and the guarantee to enable the retail client to make a fair assessment of the guarantee. [Note: article 31(5) of the MiFID implementing Directive]
COBS 14.3.6GRP
[deleted](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 provision rules (COBS 14.3.2 R to COBS 14.3.5 R) in relation to each transaction.(2) But a firm should ensure that the client has received all relevant information in relation to a transaction, such as details of product charges that differ from those already disclosed. [Note: in respect of (1),
COBS 14.3.7GRP
Providing a key features document or simplified prospectus may satisfy the requirements of the rules in this section.
COBS 14.3.8RRP
The documents and information provided in accordance with the rules in this section must be in a durable medium or available on a website (where that does not constitute a durable medium) that meets2 the website conditions. [Note: article 29(4) of the MiFID implementing Directive]
COBS 14.3.9RRP
(1) The information to be provided in accordance with the rules in this section must be provided in good time before a firm carries on designated investment business or ancillary services with or for a retail client.(2) A firm may provide that information immediately after it begins to carry on that business if:(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
COBS 14.3.10RRP
A firm must notify a client in good time about any material change to the information provided under the rules in this section which is relevant to a service that the firm is providing to that client. That notification must be given in a durable medium if the information to which it relates is given in a durable medium. [Note: article 29(6) of the MiFID implementing Directive]
COBS 14.3.11RRP
If a firm provides a client with a simplified prospectus or an EEA simplified prospectus that meets the requirements of article 28 of the UCITS Directive, it will have provided appropriate information for the purpose of the requirement to disclose information on:(1) designated investments and investment strategies (COBS 2.2.1R (1)(b)); and(2) costs and associated charges (COBS 2.2.1R (1)(d) and COBS 6.1.9 R1;in relation to the costs and associated charges in respect of the UCITS
COBS 14.3.12GRP
A simplified prospectus provides sufficient information in relation to the costs and associated charges in respect of the UCITS scheme itself. However, a firm distributing units in a UCITS scheme should also inform a client about all of the other costs and associated charges related to the provision of its services in relation to units in the UCITS scheme. [Note: recital 55 to the MiFID implementing Directive]
COBS 4.1.1RRP
1This chapter applies to a firm:(1) communicating with a client in relation to its designated investment business;(2) communicating or approving a financial promotion other than:(a) a financial promotion of qualifying credit, a home purchase plan or a home reversion plan; or(b) a financial promotion in respect of a non-investment insurance contract; or(c) a promotion of an unregulated collective investment scheme that would breach section 238(1) of the Act if made by an authorised
COBS 4.1.2GRP
(1) 4This chapter applies in relation to an authorised professional firm in accordance with COBS 18 (Specialist regimes).(2) This chapter applies, to a limited extent, in relation to communicating or approving a financial promotion that relates to a deposit if the deposit is a structured deposit, cash deposit ISA or cash deposit CTF.
COBS 4.1.3GRP
A firm is required to comply with the financial promotion rules in relation to a financial promotioncommunicated by its appointed representative even where the financial promotion does not require approval because of the exemption in article 16 of the Financial Promotion Order (Exempt persons).[Note: see section 39 of the Act]
COBS 4.1.4GRP
(1) In COBS 4.3.1 R, COBS 4.5.8 R and COBS 4.7.1 R, the defined terms "financial promotion" and "direct offer financial promotion" include, in relation to MiFID or equivalent third country business, all communications that are marketing communications within the meaning of MiFID.(2) In the case of MiFID or equivalent third country business, certain requirements in this chapter are subject to an exemption for the communication of a third party prospectus in certain circumstances.
COBS 4.1.5GRP
(1) A firm communicating with an eligible counterparty2 should have regard to the application of COBS to eligible counterparty business (COBS 1 Annex 1 Part 1).(2) This chapter does not apply in relation to communicating with an eligible counterparty other than the section on compensation information (see COBS 4.4) 2but elements of the requirements in PRIN may apply.
COBS 4.1.6GRP
Approving a financial promotion without communicating it (which includes causing it to be communicated)3 is not MiFID or equivalent third country business. Communicating a financial promotion to a person, such as a corporate finance contact or a venture capital contact, who is not a client within the meaning of COBS 3.2.1 R (1), COBS 3.2.1 R (2) or COBS 3.2.1 R (4) in respect of the MiFID or equivalent third country business to which the financial promotion relates,3 is also not
COBS 4.1.7GRP
A reference in this chapter to MiFID or equivalent third country business includes a reference to communications that occur before an agreement to perform services in relation to MiFID or equivalent third country business.[Note: see recital 82 to the MiFID implementing Directive]
COBS 4.1.8RRP
(1) In relation to communications by a firm to a client in relation to its designated investment business this chapter applies in accordance with the general application rule and the rule on business with UKclients from an overseas establishment (COBS 1 Annex 1 Part 2 paragraph 2.1R).(2) In addition, the financial promotion rules apply to a firm in relation to:(a) the communication of a financial promotion to a person inside the United Kingdom;(b) the communication of a cold call
COBS 4.1.9GRP
(1) The EEA territorial scope rule modifies the general territorial scope of the rules in this chapter to the extent necessary to be compatible with European law. This means that in a number of cases, the rules in this chapter will apply to communications made by UK firms to persons located outside the United Kingdom and will not apply to communications made to persons inside the United Kingdom by EEA firms. Further guidance on this is located in COBS 1 Annex 1.(2) One effect
COBS 4.1.10GRP
Firms should note the territorial scope of this chapter is also affected by:(1) the disapplication for financial promotions originating outside the United Kingdom that are not capable of having an effect within the United Kingdom (section 21(3) of the Act (Restrictions on financial promotion)) (see the defined term “excluded communication”);(2) the exemptions for overseas communicators (see the defined term “excluded communication”); and(3) the rules on financial promotions with
COBS 11.3.1RRP
(1) A firm which is authorised to execute orders on behalf of clients must implement procedures and arrangements which provide for the prompt, fair and expeditious execution of client orders, relative to other orders or the trading interests of the firm.[Note: paragraph 1 of article 22(1) of MiFID](2) These procedures or arrangements must allow for the execution of otherwise comparable orders in accordance with the time of their reception by the firm.[Note: paragraph 2 of article
COBS 11.3.2RRP
A firm must satisfy the following conditions when carrying out client orders:(1) it must ensure that orders executed on behalf of clients are promptly and accurately recorded and allocated;(2) it must carry out otherwise comparable orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the client require otherwise; and(3) it must inform a retail client about any material difficulty relevant
COBS 11.3.3GRP
For the purposes of the provisions of this section, orders should not be treated as otherwise comparable if they are received by different media and it would not be practicable for them to be treated sequentially. [Note: recital 78 to the MiFID implementing Directive]
COBS 11.3.4RRP
Where a firm is responsible for overseeing or arranging the settlement of an executed order, it must take all reasonable steps to ensure that any clientfinancial instruments or client funds received in settlement of that executed order are promptly and correctly delivered to the account of the appropriate client. [Note: article 47(2) of the MiFID implementing Directive and article 19(1) of MiFID]
COBS 11.3.5RRP
A firm must not misuse information relating to pending client orders, and shall take all reasonable steps to prevent the misuse of such information by any of its relevant persons. [Note: article 47(3) of the MiFID implementing Directive and article 19(1) of MiFID]
COBS 11.3.6GRP
Without prejudice to the Market Abuse Directive, for the purposes of the rule on the misuse of information (see COBS 11.3.5 R), any use by a firm of information relating to a pending client order in order to deal on own account in the financial instruments to which the client order relates, or in related financial instruments, should be considered a misuse of that information. However, the mere fact that market makers or bodies authorised to act as counterparties confine themselves
COBS 11.3.7RRP
A firm is not permitted to carry out a client order or a transaction for own account in aggregation with another client order unless the following conditions are met:(1) it must be unlikely that the aggregation of orders and transactions will work overall to the disadvantage of any client whose order is to be aggregated;(2) it must be disclosed to each client whose order is to be aggregated that the effect of aggregation may work to its disadvantage in relation to a particular
COBS 11.3.8RRP
If a firm aggregates a client order with one or more other orders and the aggregated order is partially executed, it must allocate the related trades in accordance with its order allocation policy. [Note: article 48(2) of the MiFID implementing Directive and article 19(1) of MiFID]
COBS 11.3.9RRP
A firm which has aggregated transactions for own account with one or more client orders must not allocate the related trades in a way which is detrimental to a client.[Note: article 49(1) of the MiFID implementing Directive and article 19(1) of MiFID]
COBS 11.3.10RRP
(1) If a firm aggregates a client order with a transaction for own account and the aggregated order is partially executed, it must allocate the related trades to the client in priority to the firm.(2) However, if the firm is able to demonstrate on reasonable grounds that without the combination it would not have been able to carry out the order on such advantageous terms, or at all, it may allocate the transaction for own account proportionally, in accordance with its order allocation
COBS 11.3.11RRP
A firm must, as part of its order allocation policy, put in place procedures to prevent the reallocation, in a way that is detrimental to the client, of transactions for own account which are executed in combination with client orders. [Note: article 49(3) of the MiFID implementing Directive and article 19(1) of MiFID]
COBS 11.3.12GRP
For the purposes of the provisions of this section, the reallocation of transactions should be considered as detrimental to a client if, as an effect of that reallocation, unfair precedence is given to the firm or to any particular person. [Note: recital 77 to the MiFID implementing Directive]
COBS 11.3.13GRP
In this section, carrying out client orders includes:(1) the execution of orders on behalf of clients;(2) the placing of orders with other entities for execution that result from decisions to deal in financial instruments on behalf of clients when providing the service of portfolio management;(3) the transmission of client orders to other entities for execution when providing the service of reception and transmission of orders.
COBS 12.2.1RRP
This section applies to a firm which produces, or arranges for the production of, investment research that is intended or likely to be subsequently disseminated to clients of the firm or to the public, under its own responsibility or that of a member of its group. [Note: article 25(1) of the MiFID implementing Directive]
COBS 12.2.2GRP
The concept of dissemination of investment research to clients or to the public is not intended to include dissemination exclusively to persons within the group of the firm. [Note: recital 33 of the MiFID implementing Directive]
COBS 12.2.3RRP
A firm must ensure the implementation of all of the measures for managing conflicts of interest in SYSC 10.1.11 R in relation to the financial analysts involved in the production of investment research and other relevant persons whose responsibilities or business interests may conflict with the interests of the persons to whom investment research is disseminated. [Note: article 25 (1) of the MiFID implementing Directive]
COBS 12.2.4GRP
Persons whose responsibilities or business interests may reasonably be considered to conflict with the interests of the persons to whom investment research is disseminated include corporate finance personnel and persons involved in sales and trading on behalf of clients or the firm. [Note: recital 30 of the MiFID implementing Directive]
COBS 12.2.5RRP
A firm must have in place arrangements designed to ensure that the following conditions are satisfied:(1) if a financial analyst or other relevant person has knowledge of the likely timing or content of investment research which is not publicly available or available to clients and cannot readily be inferred from information that is so available, that financial analyst or other relevant person must not undertake personal transactions or trade on behalf of any other person, including
COBS 12.2.5AGRP
Firms are reminded that they must also comply with COBS 11.7 (Rule on personal account dealing).
COBS 12.2.6GRP
Knowledge by a financial analyst or other relevant person that the firm intends to produce or disseminate investment research to its clients or to the public (including in circumstances where research material has not yet been written) could constitute knowledge of the likely timing and content of investment research under COBS 12.2.5 R (1).
COBS 12.2.7GRP
For the purposes of COBS 12.2.5 R (2):(1) current recommendations should be considered to be those recommendations contained in investment research which have not been withdrawn and which have not lapsed; and[Note: recital 34 of the MiFID implementing Directive](2) exceptional circumstances in which financial analysts and other relevant persons may, with prior written approval, undertake personal transactions in financial instruments to which investment research relates should
COBS 12.2.8GRP
Small gifts or minor hospitality below a level specified in the firm'sconflicts of interest policy and mentioned in the description of that policy that is made available to clients in accordance with COBS 6.1.4 R (8) should not be considered as inducements for the purposes of COBS 12.2.5 R (3). [Note: recital 32 of the MiFID implementing Directive]
COBS 12.2.9GRP
A financial analyst should not become involved in activities other than the preparation of investment research where such involvement is inconsistent with the maintenance of the financial analysts objectivity. The following should ordinarily be considered as inconsistent with the maintenance of a financial analyst's objectivity:(1) participating in investment banking activities such as corporate finance business and underwriting; or(2) participating in 'pitches' for new business
COBS 12.2.10RRP
A firm which disseminates investment research produced by another person to the public or to clients is exempt from complying with the requirements in COBS 12.2.3 R and COBS 12.2.5 R if the following criteria are met:(1) the person that produces the investment research is not a member of the group to which the firm belongs;(2) the firm does not substantially alter the recommendations within the investment research;(3) the firm does not present the investment research as having
COBS 12.2.11GRP
The FSA would expect a firm'sconflicts of interest policy to provide for investment research to be published or distributed to its clients in an appropriate manner. For example, the FSA considers it will be:(1) appropriate for a firm to take reasonable steps to ensure that its investment research is published or distributed only through its usual distribution channels; and(2) inappropriate for an employee (whether or not a financial analyst) to communicate the substance of any
COBS 12.2.12GRP
The FSA would expect a firm to consider whether or not other business activities of the firm could create the reasonable perception that its investment research may not be an impartial analysis of the market in, or the value or prospects of, a financial instrument. A firm would therefore be expected to consider whether its conflicts of interest policy should contain any restrictions on the timing of the publication of investment research. For example, a firm might consider whether
COBS 12.2.13GRP
The FSA considers that the significant conflicts of interest which could arise are likely to mean it is inappropriate for a financial analyst or other relevant person to prepare investment research which is intended firstly for internal use for the firm's own advantage, and then for later publication to its clients (in circumstances in which it might reasonably be expected to have a material influence on its clients' investment decisions).
COBS 16.6.1RRP
3(1) This section applies to a long-term insurer, unless, at the time of application, the client, other than an EEA ECA recipient, was habitually resident:3(a) in an EEA State other than the United Kingdom; or(b) outside the EEA and he was not present in the United Kingdom.(2) In addition, COBS 16.6.8 R applies to an operator of a personal pension scheme or stakeholder pension scheme in relation to a retail client who elects to make income withdrawals.3
COBS 16.6.2RRP
If during the term of a life policy entered into on or after 1 July 1994 there is any proposed change in the information referred to in paragraphs (1) to (12) of the Consolidated Life Directive information (COBS 13 Annex 1) the long-term insurer must inform the policyholder of the effect of the change before the change is made. [Note: article 36(2) of the Consolidated Life Directive]
COBS 16.6.3RRP
If a life policy entered into on or after 1 July 1994 provides for the payment of bonuses and the amounts of bonuses are unspecified, the long-term insurer must, in every calendar year except the first, either:(1) notify the policyholder in writing of the amount of any bonus which has become payable under the contract, and which has not previously been notified under this rule; or(2) give the policyholder in writing sufficient information to enable him to determine the amount
COBS 16.6.4RRP
(1) When a firm provides information in accordance with this section, it must provide the information in a durable medium, unless (2) applies.(2) If the contract is being made by telephone, the firm may give the information orally to the customer. If the customer enters into the contract, a written version of the required information must be sent to the customer within five business days of the contract being entered into.
COBS 16.6.5RRP
Where a life policy is effected jointly, the information required by this section may be sent to the first named client.
COBS 16.6.6RRP
A firm must make an adequate record of information provided to a customer under this section and retain that record for a minimum period after the information is provided of five years.
COBS 16.6.7RRP
1At each anniversary of the date on which a long-term care insurance contract which is based on single premium investment bonds was entered into, the insurer must:(1) provide the retail client with a table based on the format of COBS 13 Annex 3 2.2R containing at least the current fund value and projected future policy values (as in column "What you might get back"); (2) where it is the case, inform the retail client of the possibility that future policy values may be insufficient
COBS 16.6.8RRP
1At intervals no longer than 12 months from the date of an election by a retail client to make income withdrawals, the relevant operator of a personal pension scheme or stakeholder pension scheme3must:3(1) provide the retail client with such information as is necessary for3 the retail client to review the election, including where relevant the information required by COBS 13 Annex 2 2.9R3; and3(2) inform the retail client how to obtain advice on investments in respect of his income
COBS 11.8.1RRP
1This section applies to a firm:(1) which carries out any of the following activities:(a) receiving client orders;(b) executing client orders;(c) arranging for client orders to be executed;(d) carrying out transactions on behalf of the firm, or another person in the firm's group, and which are part of the firm's trading activities or the trading activities of another person in the firm's group;(e) executing orders that result from decisions by the firm to deal on behalf of its
COBS 11.8.2RRP
This section does not apply to the carrying on of the following activities:(1) activities carried on between operators, or between operators and depositories, of the same collective investment scheme (when acting in that capacity);(2) corporate finance business;(3) corporate treasury functions.
COBS 11.8.3RRP
This section does not apply to the following firms or persons:(1) a service company;(2) a non-directive friendly society;(3) a non-directive insurer;(4) a UCITS qualifier.
COBS 11.8.4RRP
This section applies only with respect to a firm's activities carried on from an establishment maintained by the firm in the United Kingdom.
COBS 11.8.5RRP
A firm must take reasonable steps to record relevant telephone conversations, and keep a copy of relevant electronic communications, made with, sent from or received on equipment:(1) provided by the firm to an employee or contractor; or(2) the use of which by an employee or contractor has been sanctioned or permitted by the firm;to enable that employee or contractor to carry out any of the activities referred to in COBS 11.8.1 R.
COBS 11.8.6RRP
The obligation in COBS 11.8.5 R does not apply to:(1) telephone conversations and electronic communications (except emails) made with, sent from or received on a mobile telephone or other mobile handheld electronic communication device; or(2) a discretionary investment manager, in respect of telephone conversations or electronic communications made with, sent to or received from a firm which the discretionary investment manager reasonably believes is subject to the recording obligation
COBS 11.8.7GRP
Electronic communications includes communications made by way of facsimile, email and instant messaging devices.
COBS 11.8.8RRP
For the purposes of COBS 11.8.5 R, a relevant conversation or communication is any one of the following:(1) a conversation or communication between an employee or contractor of the firm with a client, or when acting on behalf of a client, with another person, which concludes an agreement by the firm to carry out the activities referred to in COBS 11.8.1 R as principal or as agent;(2) a conversation or communication between an employee or contractor of the firm with a professional
COBS 11.8.9GRP
(1) COBS 11.8.8R (2) includes conversations and communications relating to specific transactions which are intended to lead to the conclusion of an agreement by the firm to deal with or on behalf of the client as principal or agent, even if those conversations or communications do not lead to the conclusion of such an agreement. It does not include conversations or communications which are not intended to lead to the conclusion of such an agreement, such as general conversations
COBS 11.8.10RRP
A firm must take reasonable steps to retain all records made by it under COBS 11.8.5 R:(1) for a period of at least 6 months from the date the record was created;(2) in a medium that allows the storage of the information in a way accessible for future reference by the FSA, and so that the following conditions are met:(a) the FSA must be able to access the records readily;(b) it must be possible for any corrections or other amendments, and the contents of the records prior to such
COBS 6.1.1RRP
(1) 1This section applies to a firm that carries on designated investment business for:(a) a retail client; and(b) in the case of MiFID or equivalent third country business, a client.(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 6.1.2RRP
If a firm provides basic advice on stakeholder products in accordance with the basic advicerules, this section does not apply to that service.
COBS 6.1.4RRP
A firm must provide a retail client with the following general information, if relevant:(1) the name and address of the firm, and the contact details necessary to enable a client to communicate effectively with the firm;(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) the methods of communication to be used between the firm and the client
COBS 6.1.6RRP
(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) 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:(a)
COBS 6.1.7RRP
(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(a) if applicable,(i) that the designated investments or client money of that client may be held by a third party on behalf of the firm;(ii) the responsibility of the firm under the applicable national law for any acts or omissions of the third party; and(iii) the consequences for
COBS 6.1.9RRP
A firm must provide a retail client with information on costs and associated charges including, if applicable:(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
COBS 6.1.11RRP
(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) A firm may instead provide that information immediately after starting to provide designated investment business or ancillary services if:(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
COBS 6.1.13RRP
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]
COBS 6.1.14RRP
(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) 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]
COBS 6.1.15GRP
(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) 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
COBS 6.1.16RRP
(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) The information under (1) must include the amount and scope of