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2005-01-01
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2006-06-06
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COB 11.1 Application

COB 11.1.1 R 01/12/2001

This chapter applies to depositaries and trustee firms when acting as such.

COB 11.1.2 G 01/12/2001

The definition of depositary includes trustees of authorised and unauthorised unit trust schemes as well as depositaries of ICVCs. The definition of trustee firm includes any firm carrying on activity as a trustee but not an OPS firm. There is overlap between these definitions. A trustee of an authorised unit trust scheme is both a trustee firm and a depositary.

COB 11.1.3 G 01/12/2001

The definition of trustee firm includes a firm acting as personal representative.

COB 11.1.4 G 01/12/2001

Firms are reminded that trustee firm may include individuals who require authorisation and who are within the definition of trustee firm. It also includes partnerships where the partnership requires authorisation.

COB 11.1.5 G 01/12/2001

Article 66 of the Regulated Activities Order provides exclusions for some trustees, nominees and personal representatives from certain regulated activities. This chapter does not apply to a trustee firm in respect of an activity which is excluded from being a regulated activity carried on by the trustee firm under any paragraph in article 66.

COB 11.1.6 G 01/12/2001

In COB only the rules in COB 1, COB 11 and the rules applied by this chapter apply to a trustee firm or depositary.

COB 11.1.7 G 01/12/2001

This chapter does not apply with respect to any regulated activities carried on by a trustee with a trust beneficiary where the trustee firm is not acting as trustee. Such activities would be subject to the rules in COB applied otherwise than through this chapter.

COB 11.1.8 G 01/12/2001

In respect of trustee firms, the rules:

(1)
apply in addition to any duties or powers imposed or conferred upon a trustee by the general law;
(2)
do not qualify or restrict the duties or powers that the general law imposes or confers upon a trustee; trustee firms will be under a duty to observe the provisions of their trust instrument; if its provisions conflict with any applicable rule, trustees will need to take advice in resolving the conflict.

COB 11.1.9 G 01/12/2001

A depositary of a regulated collective investment scheme is also required to comply with the Collective Investment Schemes sourcebook (CIS).

COB 11.1.10 G 01/12/2001

A depositary of an ICVC is also required to comply with the OEIC Regulations.

COB 11.1.11 G 01/03/2006

All depositaries and trustee firms are also required to comply in particular with the Principles for Businesses (PRIN) and1 Senior Management Arrangements, Systems and Controls (SYSC).

1 1

Purpose

COB 11.1.12 G 01/12/2001

The purpose of this chapter is to select rules to apply to the activities of trustee firms and depositaries. COB is modified by this chapter for that purpose. The rules in this chapter:

(1)
redefine customer so that it applies meaningfully in the trustee firm/depositary context. A trustee firm, for example, may be both the customer and the firm. A requirement to make a disclosure to a customer may therefore not be clear when applied to a trustee firm - the requirement may be taken to apply to the trustees as a body, or to the trust beneficiaries. In the context of collective investment schemes disclosure may appropriately be effected through reports and documentation sent to the participants;
(2)
recognise that some trustee firms may not be experts in investment; in consequence they should be allowed to delegate regulatory responsibility for compliance with COB to other suitable firms.
(3)
apply appropriate rules to different types of trustee; for example the rules in COB 11.5.3 R are not applied to personal representatives because this would amongst other things require such a firm to send out periodic statements.
(4)
apply rules specifically devised for trustee firms or depositaries; for example, COB 11.8 (Proper advice) applies only to trustee firms.

COB 11.2 Relationship with the scheme

COB 11.2.1 G 01/09/2003

[deleted]

(1)
[deleted]
(2)
[deleted]1

COB 11.2.2 R 01/12/2001

Where a trustee firm is required by any applicable rule in COB to provide information to, or obtain consent from, a customer, the trustee firm must ensure the information is provided to, or consent obtained from all the trustees, or as many trustees as are required by the trust instrument.

COB 11.3 Packaged products1

COB 11.3.1 R 01/12/2004

A trustee firm must not arrange the purchase, or recommend the purchase of a packaged product unless the trustee firm has taken reasonable steps to ensure that that packaged product will secure the investment objectives of the trust of which it is trustee at least as well as any other generally available packaged product of which it is or reasonably should be aware.

COB 11.4 Depositaries

COB 11.4.1 R 01/12/2001

A depositary when acting as such:

(1)
must comply with the rules in COB specified in COB 11.4.3 R, as modified;
(2)
need not comply with any other rule in COB.

COB 11.4.2 G 01/12/2001

COB 11.4.1 R applies to a trustee firm which is also a depositary. If a trustee firm is not a depositary then COB 11.5 applies instead.

COB 11.4.3 R 01/12/2004

Rules applicable to depositaries

This table belongs to COB 11.4.1 R

Chapter	Description	Modifications
1	Application and general provisions	'Customer' means 'trustee' or 'trust', as appropriate. COB 1.5 and COB 1.6 do not apply.
2.1 to 2.4	Rules which apply to all firms	COB 2.2.8 R -COB 2.2.20 R do not apply. For the depositary of a unit trust scheme, 'customer' means 'trustee' or 'trust', as appropriate. For the depositaryof an ICVC, 'customer' means the ICVC. For the depositary of any other collective investment scheme, 'customer' means the scheme.
2.5	Exclusion of liability	For the depositary of a unit trust scheme, 'customer' and 'private customer' mean 'trustee' or 'trust', as appropriate. For the depositary of an ICVC, 'customer' means the ICVC. For the depositary of any other collective investment scheme, 'customer' means the scheme.
3	Financial promotion
5.5	Information about the firm	'Customer' and 'private customer' mean 'trustee' or the operator of the collective investment scheme, as appropriate.
7.1	Conflict of interest and material interest	'Customer' and 'private customer' mean 'trustee' or 'trust', as appropriate.
7.13	Personal account dealing	'Client' and 'customer' mean 'collective investment scheme'.1
[deleted] 10	[deleted] Operators of collective investment schemes	[deleted] The chapter does not apply to a depositary of an ICVC. It applies to the trustee of a unit trust scheme only where there is no separate operator, or where and to the extent that the separate operator does not take all day-to-day investment decisions in relation to the scheme.
11	Trustee and depositary activities

COB 11.5 Trustee firms which are not depositaries

COB 11.5.1 R 01/12/2001

The only rules in COB which apply to a trustee firm which is not a depositary and when acting as such are as follows:

(1)
where the firm is:
1. (a)
  a bare trustee (or, in Scotland, a nominee) holding investments for another person and acting on that person's instructions;
2. (b)
  a personal representative;
3. (c)
  a trustee acting as trustee of an issue of debentures or government and public securities:
  1. (i)
    where the issue is made by a company listed on a recognised investment exchange or on a designated investment exchange (or by a wholly-owned subsidiary of such a company); or
  2. (ii)
    where the issue is made by a government, local authority or public authority; or
  3. (iii)
    where the aggregate amounts issued (under the trust deed or any deed supplemental to it and ignoring any amounts redeemed, repurchased or converted) exceed the sum of £10,000,000, or its equivalent in a foreign currency;
the rules in COB 11.5.2 R, as modified
(2)
where the firm does not fall within (1), the rules in COB 11.5.3 Ras modified.

COB 11.5.2 R 01/01/2006

Rules applicable to trustee firms which are not depositaries and to which COB 11.5.1R (1) applies

This table belongs to COB 11.5.1 R (1).

Chapter	Description	Modifications
1	Application and general provisions	'Customer'means 'trustee' or 'trust', as appropriate. COB 1.5 and COB 1.6 do not apply.
2.1	Clear, fair and not misleading communication	'Customer' means 'trustee'
2.2	Inducements and soft commission	'Customer' means 'trustee' or 'trust', as appropriate.
2.3	Reliance on others	'Customer' means 'trustee'.
2.4	Chinese walls	'Customer' and 'client' mean 'trustee' or 'trust', as appropriate.
2.5	Exclusion of liability	'Customer' and 'private customer' mean 'trustee', as appropriate.
3	Financial promotion
4.1	Client classification	'Client' and 'customer' mean 'trustee' or 'trust', as appropriate.
5.5	Information about the firm	'Customer' and 'private customer' means 'trustee' or 'trust', as appropriate.
7.1	Conflict of interest and material interest	'Customer' means 'trustee' or 'trust', as appropriate.
7.2	Churning and switching	'Customer' means 'trustee' or 'trust', as appropriate.
[deleted]	[deleted]	[deleted]
7.18 3	Use of dealing commission	'Customer' means 'trustee' or 'trust' as appropriate.
11 2	Trustee and depositary activities

COB 11.5.3 R 01/01/2006

Rules applicable to trustee firms which are not depositaries and to which COB 11.5.1R (2) applies

This table belongs to COB 11.5.1 R (2).

Chapter	Description	Modifications
1	Application and general provisions	'Customer' means 'trustee' or 'trust', as appropriate. COB 1.5 and COB 1.6 do not apply.
2.1	Clear, fair and not misleading communication	'Customer' means 'trustee'
2.2	Inducements and soft commission	'Customer' means 'trustee' or 'trust', as appropriate.
2.3	Reliance on others	'Customer' means 'trustee'.
2.4	Chinese walls	'Customer' and 'client' mean 'trustee' or 'trust', as appropriate.
2.5	Exclusion of liability	'Customer' and 'private customer' mean 'trustee' or 'trust', as appropriate.1
3	Financial promotion
4.1	Client classification	'Client' and 'customer' mean 'trustee' or 'trust', as appropriate.
5.2	Know your customer	'Customer' and 'private customer'mean 'trustee' or 'trust', as appropriate.
5.3	Suitability	'Customer' and 'private customer' mean 'trustee' or 'trust', as appropriate. COB 5.3.14 R - COB 5.3.19 R do not apply to a trustee firm. However, a trustee firm must keep appropriate records to show compliance with COB 5.3.
5.4	Customers' understanding of risk	'Customer' and 'private customer' mean 'trustee'.
5.5	Information about the firm	'Customer' and 'private customer' means 'trustee' or 'beneficiary', as appropriate.
7.1	Conflict of interest and material interest	'Customer' and 'private customer' mean 'trustee', or 'trust', as appropriate.
7.2	Churning and switching	'Customer' means 'trustee' or 'trust', as appropriate.
7.3	Dealing ahead	'Customer' means 'trustee' or 'trust', as appropriate.
7.4	Customer order priority	'Customer' means 'trust'.
7.5	Best execution	'Customer' means 'trustee' or 'trust', as appropriate.
7.6	Timely execution	'Customer' means 'trust'.
7.7	Aggregation and allocation	'Customer' means 'customer'or 'trust', as appropriate.
7.9	Lending to private customers	'Private customer' means 'beneficiary'.
7.10	Margin requirements	'Customer' and 'private customer' mean 'trustee' or 'trust', as appropriate.
7.12	Customer order and execution records	'Customer' means 'trustee' or 'trust', as appropriate.
7.13	Personal account dealing	'Client' means 'trust'.
7.14	Programme trading	'Customer' means 'trustee' or 'trust', as appropriate.
7.15	Non market price transactions	'Customer' means 'trustee' or 'trust', as appropriate.
7.18 3	Use of dealing commission	'Customer' means 'trustee' or 'trust' as appropriate.
8.1	Confirmation of transactions	'Customer' means 'trustee' or 'trust', as appropriate.
8.2	Periodic statements	'Customer' means 'trustee' or 'trust', as appropriate.
[deleted]	[deleted]	[deleted] 2
11	Trustee and depositary activities

COB 11.6 Delegation to a permitted third party.

COB 11.6.1 R 01/12/2001

A trustee firm may not appoint a permitted third party ("PTP") under this rule unless:

(1)
the trustee firm could not reasonably be expected to discharge the responsibility itself.
(2)
the delegation is made in writing which:
1. (a)
  describes in adequate detail the regulated activities to be carried on by the PTP; and
2. (b)
  states that the arrangement is to be regarded as a PTP arrangement for the purposes of this rule;
(3)
the PTP undertakes in writing to the trustee firm to comply with all rules relevant to the regulated activity in question; and
(4)
the PTP is an appropriate person to perform the regulated activity.

COB 11.6.2 G 01/12/2001

For the purposes of COB 11.6.1 R (1) a trustee firm may reasonably be expected to accept responsibility for the PTP's compliance where the trustee firm undertakes substantial trustee business. The PTP rules are intended to be of assistance to smaller trustee firms who are inexperienced in regulated business.

COB 11.6.3 G 01/12/2001

For the purposes of COB 11.6.1 R (4), where the PTP has appropriate permission enabling him to carry on the regulated activity in question, that fact may be taken to indicate that the PTP is an appropriate person to perform the regulated activity.

COB 11.6.4 R 01/12/2001

When a trustee firm has appointed a PTP under COB 11.6.1 R, the trustee firm will not be responsible for compliance by the PTP with any rules relating to any regulated activity which the PTP carries on for the trustee firm.

COB 11.6.5 G 01/12/2001

The effect of COB 11.6.4 R is that the trustee firm is not liable for the acts or defaults of the PTP in respect of the regulated activities concerned.

COB 11.6.6 R 01/12/2001

The trustee firm must notify the FSA within 14 days of it delegating any regulated activity to a PTP and the notification must include the identity of the PTP.

COB 11.6.7 G 01/12/2001

Trustee firms are reminded that permitted third party is defined as being either: (a) an authorised person; (b) an exempt person for whom an authorised person is accepting responsibility; or (c) a person lawfully carrying on a regulated activity in another EEA State.

COB 11.6.8 G 01/12/2001

Trustee firms may delegate to persons other than permitted third parties under general principles of law and subject to the FSA's rules.

COB 11.6.9 G 01/12/2001

The rules permitting use of a PTP do not absolve the trustee firm from the need to comply with any restrictions on delegation or the manner of delegation derived from trust law or from the trust instrument. The rules do not affect the trustee firm's position under the general law, including the law of agency.

COB 11.7 Record Keeping

COB 11.7.1 R 01/12/2001

(1)
A firm must make a record of any written delegation to a PTP under COB 11.6.1 R (1) and of the PTP's undertaking under COB 11.6.1 R (2) and of any variation of those documents.
(2)
A record in (1) must be retained for a period ending three years after the date on which the PTP's appointment ceases.

COB 11.7.2 G 01/12/2001

COB 11.7.1 R obliges a trustee firm to keep records of any variations in the terms of the agreement occurring during the period of the PTP's appointment for three years from the date at which the appointment ends.

COB 11.8 Proper advice

COB 11.8.1 R 01/12/2001

A trustee firm must obtain and consider proper advice whenever it intends to exercise its power of investment, except where there are reasonable grounds for not doing so.

COB 11.8.2 G 01/12/2001

Proper advice is advice from a person who is able to give it competently.

COB 11.8.3 G 01/12/2001

There is no need to obtain proper advice where there are reasonable grounds not to do so, for example if the trustee firm is itself appropriately qualified to make the particular investment decision concerned or if the investment decision could be reasonably considered not to merit obtaining proper advice.

COB 11.8.4 G 01/12/2001

COB 11.8 amplifies the requirements of section 6(2) of the Trustee Investments Act 1961 (or section 5 of the Trustee Act 2000 from the date on which that Act enters into force) and trustees' duties at common law.

COB 11.8.5 R 01/12/2001

A trustee firm must follow the proper advice received unless it is reasonable not to do so.

COB 11.8.6 G 01/12/2001

A trustee firm which finds it necessary to seek proper advice would normally be expected to follow the advice received. However, there may be reasonable grounds to disregard the advice. For example, a trustee firm may be unable to follow proper advice because of restrictions arising from the trust instrument.

COB 11.8.7 R 01/12/2001

The trustee firm must make records to show compliance with COB 11.8.5 R and retain them for three years from the date on which the proper advice is received.

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