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  1. Point in time
    2007-09-05

COB 7.2 Churning and switching

Application

COB 7.2.1R

This section applies to a firm that conducts designated investment business with or for a customer.

Purpose

COB 7.2.2G

Principle 6 (Customers' interests) requires a firm to pay due regard to the interests of its customers and treat them fairly. A firm should therefore not "churn" a customer's account, that is, enter into transactions with unnecessary frequency having regard to the customer's agreed investment strategy. A firm should also not switch a private customer within or between packaged products unnecessarily, having regard to what is suitable for that customer. Firms are reminded that a customer's interests are paramount.

Restrictions on dealing and switching

COB 7.2.3R

A firm must not:

  1. (1)

    deal, or arrange a deal, in the exercise of discretion for any customer; or

  2. (2)

    make a personal recommendation to a private customer to deal, or arrange a deal that gives effect to such a recommendation; or

  3. (3)

    make or arrange a switch within a packaged product or between packaged products, in the exercise of discretion for a private customer; or

  4. (4)

    make a personal recommendation to a private customer to switch within a packaged product or between packaged products, or make or arrange a switch that gives effect to such a recommendation;

unless the firm has taken reasonable steps to ensure that the deal or switch is in the customer's best interests, both when viewed in isolation and when viewed in the context of earlier transactions.