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  1. Point in time
    2006-07-07

COB 4 Annex 2 1Terms of business content - general

COB 4 Annex 2.1E

1Content of terms of business provided to a customer: general requirements

This table belongs to COB 4.2.11 E

2

A firm's terms of business (including a client agreement) provided to a customer should, where relevant, include some provision about:

(1)

Commencement of the terms of business

When and how the terms of business are to come into force.

(2)

Regulator

The firm's statutory status (in accordance with GEN 4 Annex 1 (Statutory Status Disclosure)).

(3)

Investment objectives

The customer's investment objectives.

(4)

Restrictions

(a)

Any restrictions on:

(i)

the types of designated investment in which the customer wishes to invest; and

(ii)

the markets on which the customer wishes transactions to be executed; or

(b)

that there are no such restrictions.

(5)

Services

The services the firm will provide.

(6)

Payments for services

Details of any payment for services payable by the customer to the firm, including where appropriate:

(a)

the basis of calculation;

(b)

how it is to be paid and collected; and

(c)

how frequently it is to be paid;

whether or not any other payment is receivable by the firm (or to its knowledge by any of its associates) in connection with any transaction executed by the firm, with or for the customer, in addition to or in lieu of any fees.

(7)

Investment manager

If the firm is to act as an investment manager:

(a)

the arrangements for giving instructions to the firm and acknowledging those instructions;

(b)

the initial value of the managed portfolio;

(c)

the initial composition of the managed portfolio; and

(d)

the period of account for which statements of the portfolio are to be provided in accordance with COB 8.2.4 (Requirement for a periodic statement) (where periodic statements are required).

(8)

Accounting

The arrangements for accounting to the customer for any transaction executed on his behalf.

(9)

Cancellation and withdrawal

(a)

In the case of a non-packaged productISA, PEP or CTF, an explanation of any right to withdraw (see COB 6.7 (Cancellation and withdrawal)) or, if it is the case, a statement that such rights will not apply.3

(b)

(In the case of ISAs), information about:

(i)

the options available on cancellation;

(ii)

how cancellation will operate in circumstances where the account forms part of, for example, a maxi-ISA which contains other components; and

(iii)

a statement that the effect of cancelling the last component has the effect of cancelling the entire ISA agreement and may also (where it is the case) delay the customer from entering into another ISA agreement until the next tax year.

(10)

Unsolicited real time financial promotion

In the case of a private customer, the circumstances, if any, in which the firm or its representative or employees may communicate an unsolicited real time financial promotion to the private customer.

(11)

Acting as principal

That the firm may act as principal in a transaction with the customer, if this is the case.

(12)

Conflict of interest and material interest

When a material interest or conflict of interest may or does arise, the manner in which the firm will ensure fair treatment of the customer as required by COB 7.1.3 R (Fair treatment).

(13)

Broker fund adviser

If the firm acts as a broker fund adviser for a private customer, a statement explaining the nature of the firm's dual role as adviser to the customer and adviser to the life office or operator in question.

(14)

Use of dealing commission

If the firm receives goods or services in addition to the execution of its customer orders in accordance with COB 7.18 (Use of dealing commission), the prior disclosure required by COB 7.18.12 R (Prior and periodic disclosure).4

44

(15)

Customer's understanding of risk

When a firm chooses to fulfil its obligations under COB 5.4.3 R (Requirement for risk warnings) in the terms of business in relation to any of the following:

(a)

warrants or derivatives;

(b)

non-readily realisable investment;

(c)

penny shares;

(d)

securities which may be subject to stabilisation;

(e)

stock lending activity;

(f)2

a security or an investment trust savings scheme which satisfies the conditions specified in COB 3.8.9 G (6);2

the relevant risk warning.

(16)

Unregulated collective investment scheme

That the services to be provided by the firm will or may include advice on investments relating to, or executing transactions in units in unregulated collective investment schemes, if this is the case.

(17)

Underwriting

That the firm may enter into transactions for the customer, either generally or subject to specified limitations, when the customer will incur obligations as an underwriter or sub-underwriter, if this is the case.

(18)

Stock lending

In the case of a private customer, that the firm may undertake stock lending activity with or for the private customer (if this is the case), specifying the assets to be lent, the type and value of relevant collateral from the borrower and the method and amount of payment due to the private customer in respect of the lending.

(19)

Right to realise a private customer's assets

The information required by COB 7.8.3 R (Contractual rights to realise a private customer's assets), if applicable.

(20)

Complaints procedure

How to complain to the firm, and a statement, if relevant, that the customer may subsequently complain directly to the Financial Ombudsman Service.

(21)

Compensation

Whether or not compensation may be available from the compensation scheme, should the firm be unable to meet its liabilities, and information about any other applicable named compensation scheme; and, for each applicable scheme, the extent and level of cover and how further information can be obtained. (See the example in COB 5.5.11 G (Investment firms: compensation information)).

(22)

Termination method

How the terms of business may be terminated, including a statement:

(a)

That termination will be without prejudice to the completion of transactions already initiated, if this is the case;

(b)

That the customer may terminate the terms of business by written notice to the firm and when this may take effect;

(c)

That if the firm has the right to terminate the terms of business, it may do so by notice given to the customer, and specifying the minimum notice period, if any; and

(d)

of any agreed time after which, or any agreed event on which, the terms of business will terminate.

(23)

Termination consequences

The way in which transactions in progress are to be dealt with upon termination.

(24)

Contracting out of best execution

When the obligation to provide best execution can be and is to be waived, a statement:

(a)

that the firm does not owe a duty of best execution; or

(b)

the circumstances in which it does not owe such a duty.

(25)

Authorised professional firms

If the firm is an authorised professional firm and may conduct a non-mainstream regulated activity with or for the customer (whether with or without any other regulated activity for the same customer), an explanation, with respect to that activity, of:

(a)

how to complain to the firm, where the customer may subsequently complain and the mechanisms that operate in respect of such a subsequent complaint; and

(b)

what, if any, compensation arrangements are available to the customer if the firm is unable to meet any of its liabilities, or the availability of an explanation describing those arrangements.