1. (1)

   This section applies to a firm when it is conducting designated investment business with or for a customer.

2. (2)

   COB 7.1.4 E (1) do not apply in relation to investment research (see COB 7.3 (Dealing ahead of investment research)).5

3. (3)

   This section does not apply to a common platform firm if SYSC 10.1 (conflicts of interest) applies to the firm.6

If a firm has or may have:

1. (1)

   a material interest in a transaction to be entered into with or for a customer; or

2. (2)

   a relationship that gives or may give rise to a conflict of interest in relation to a transaction in (1); or

3. (3)

   an interest in a transaction that is, or may be, in conflict with the interest of any of the firm's customers; or

4. (4)

   customers with conflicting interests in relation to a transaction;

the firm must not knowingly advise, or deal in the exercise of discretion, in relation to that transaction unless it takes reasonable steps to ensure fair treatment for the customer (see COB 2.4.7 G (Attribution of knowledge)).

In addition to COB 7.1.3 R, a broker fund adviser, acting for a private customer, must obtain an acknowledgement from the private customer stating that he understands the nature of the firm's dual role as adviser to the private customer and adviser to the long-term insurer, overseas long-term insurer or operator of the broker fund in question.3

1. (1)

   A broker fund adviser must ensure that it does not effect, personally recommend or arrange (bring about) the issue to a customer of a life policy by a relevant insurance undertaking, under which contributions will be made to the adviser's broker fund, unless the relevant insurance undertaking is contractually responsible to that customer in writing for the acts and omissions of the broker fund adviser or its associate in its role as an adviser to that fund as if they were the acts or omissions of the relevant insurance undertaking and will remain responsible until the earlier of:

   1. (a)

      the broker fund adviser or its associate ceasing to be the adviser to the fund; and

   2. (b)

      the termination of the policy.

2. (2)

   In (1), a relevant insurance undertaking is an insurance undertaking which does not have permission to effect or carry on long-term insurance business but which is authorised to carry on long-term insurance business in the Bailiwick of Guernsey, the Isle of Man, the Commonwealth of Pennsylvania, the State of Iowa or the Bailiwick of Jersey.

3. (3)

   In (1), associate has the extended meaning given to it in the definition of broker fund adviser.

4. (4)

   A firm must comply with the requirements in (1) where it effects, personally recommends or arranges (brings about) switching in relation to a broker fund for the customer.3

A product provider with a broker fund must not enter into a transaction with a customer in respect of a broker fund, unless there is a written agreement in force between it, the broker fund adviser and any other person having responsibility for the management of the broker fund to which the agreement relates, clearly establishing the responsibilities of each party to the agreement, the investment objectives of the broker fund and the policies and strategies that are to be followed to achieve those objectives.3

In addition to COB 7.1.3 R, a UCITS management company which also manages investments (other than of collective investment schemes) must obtain prior general approval from the client before it invests all or part of the client's portfolio in the units of a UCITS it manages.2

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

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.

This section applies to a firm if it, or any of its associates, prepares investment research for publication or distribution to its clients, or intends to publish or distribute investment research to its clients.2

If a firm or its associate intends to publish or distribute investment research to clients or prepares investment research for publication or distribution to its clients, unless COB 7.3.4 R applies, the firm must:

1. (1)

   not knowingly undertake an own account transaction in the designated investment concerned or any related designated investment; and

2. (2)

   (when the intention to publish is that of, or is known to, the firm) take all reasonable steps to ensure that its associates do not knowingly undertake any own account transaction in that designated investment, or any related designated investment;

until the clients for whom the publication was principally intended have had (or are likely to have had) a reasonable opportunity to act upon it.21

COB 7.3.3 R does not apply if:

1. (1)

   [deleted]

2. (2)

   the firm or its associate is a market maker in the designated investment concerned or in a related designated investment and it undertakes the transaction in good faith and in the normal course of market making; or

3. (3)

   the firm or its associate deals in order to fulfil an unsolicited customer order.

4. (4)

   [deleted] 1

5. (5)

   [deleted]2

This section applies to a firm when executingcustomer orders in designated investments.

A firm must execute customer orders and own account orders in designated investments fairly and in due turn.

This section applies to a firm when executing a customer order in a designated investment.

A firm that executes a customer order in a designated investment must provide best execution, unless COB 7.5.4 R applies.

COB 7.5.3 R does not apply in any of the following circumstances:

1. (1)

   the customer order is for:

   1. (a)

      the purchase of a life policy; or

   2. (b)

      the purchase of or sale of units in a regulated collective investment scheme from or to the operator of that scheme;

2. (2)

   the firm has agreed with an intermediate customer that it need not owe a duty of best execution to him, unless that customer is:1

   1. (a)

      the trustee of an occupational pension scheme or an OPS collective investment scheme; or

   2. (b)

      the trustee of any other trust for whom, and to the extent that, the firm acts as a permitted third party under COB 11.6 (Delegation to a permitted third party); or

3. (3)

   the firm relies on another person to whom it passes a customer order for execution to provide best execution, but only if it has taken reasonable care to ensure that he will do so.

To provide best execution, a firm must:

1. (1)

   take reasonable care to ascertain the price which is the best available for the customer order in the relevant market at the time for transactions of the kind and size concerned; and

2. (2)

   execute the customer order at a price which is no less advantageous to the customer, unless the firm has taken reasonable steps to ensure that it would be in the customer's best interests not to do so.

This section applies to a firm when it agrees or decides in the exercise of its discretion to execute a current customer order in a designated investment.

Once a firm has agreed or decided in its discretion to execute a current customer order in a designated investment, it must do so as soon as reasonably practicable unless COB 7.6.5 R applies.

COB 7.6.4 R does not apply if a firm has taken reasonable steps to ensure that postponing the execution of a current customer order in a designated investment is in the best interests of the customer.

This section applies to a firm when it aggregates a customer order with an own account order, or with an order from a market counterparty, or with another customer order, while conducting designated investment business.

When a firm aggregates a customer order with an own account order, or with an order from a market counterparty, or with another customer order, and subsequently allocates the designated investments concerned, it must do so in accordance with a written policy on allocation that is consistently applied and that fulfils the requirements of this section.

A firm may not aggregate a customer order with an own account order, or with an order from a market counterparty, or with another customer order, unless:

1. (1)

   it is likely that the aggregation will not work to the disadvantage of each of the customers concerned; and

2. (2)

   it has disclosed either orally or in writing to each customer concerned, either specifically or in the terms of business, that the effect of aggregation may work on some occasions to its disadvantage.

When a firm has aggregated a customer order with an own account order, or with an order from a market counterparty, or with another customer order, and part or all of the aggregated order has been filled, it must promptly allocate the designated investments concerned.

When a firm executes an aggregated order that combines:

1. (1)

   a customer order and an own account order; or

2. (2)

   a customer order and an order from a market counterparty (other than an associate of the firm); or

3. (3)

   a customer order and another customer order;

in the subsequent allocation it must:

1. (4)

   not give unfair preference to the firm or to any of those for whom it dealt; and

2. (5)

   where (1) applies, give priority to satisfying customer orders, if the aggregate total of all orders cannot be satisfied, unless it can demonstrate on reasonable grounds that without its own participation it would not have been able to execute those orders on such favourable terms, or at all.

A firm may treat the following as a customer order:

1. (1)

   a transaction on the account of the life fund of an insurance company, when the insurance company is in the same group as the firm (or is the firm);

2. (2)

   a transaction for the account of an investment trust or a collective investment scheme that is a body corporate in the same group as the firm;

3. (3)

   a transaction for the account of an employee (or a close relative) of the firm or of its associate, or a trustee acting on his behalf, but only when the transaction is undertaken on a pre-established and recorded basis;

4. (4)

   a transaction for the firm's occupational pension scheme.

A firm may undertake a revised allocation of an aggregated order if:

1. (1)

   an error is identified in either the intended basis of allocation or the actual allocation, provided that the firm makes a record of the reason for the re-allocation and completes it within one business day of the error being identified; or

2. (2)

   the order is only partially executed resulting in an uneconomic allocation to some customers; in such a case the firm must take reasonable steps to ensure that a re-allocation is in the best interests of the customers for whom it has dealt; and

3. (3)

   the revised allocation is carried out in accordance with COB 7.7.12 R.

When a firm has executed an aggregated order or is undertaking a revised allocation as described in COB 7.7.11 R, then it must allocate that order either at:

1. (1)

   the price paid for each designated investment concerned (net of all relevant fees and commissions); or

2. (2)

   a volume-weighted average of the prices of a series of transactions.

1. (1)

   A firm must, on executing an aggregated transaction that includes one or more customer orders, make a record of:

   1. (a)

      the identity of each client concerned;

   2. (b)

      whether the transaction is to be transacted in whole or in part for a discretionary managed investment portfolio and, if in part, the relevant proportions.

2. (2)

   If a firm aggregates a number of client orders that include one or more customer orders, the firm must make a record of the intended basis of allocation as soon as is practicable.

3. (3)

   If a firm aggregates an order for one or more customers and itself, the firm must make a record of the intended basis of allocation before the transaction is executed.

When allocating an aggregated transaction that includes the execution of one or more customer orders, a firm must make a record of:

1. (1)

   the date and time of the allocation;

2. (2)

   the relevant designated investment;

3. (3)

   the identity of each customer and market counterparty concerned;

4. (4)

   the amount allocated to each respective customer, market counterparty and to the firm; and

5. (5)

   the agreement with each intermediate customer to extend the allocation period under COB 7.7.6 E (2)(b).

A firm must make a record of the basis of and reason for any re-allocation made in accordance with COB 7.7.11 R at the time of the re-allocation.

A firm must retain the records required by COB 7.7 for a period of at least three years from the date on which the order is allocated or re-allocated.

This section applies to a firm when it:

1. (1)

   seeks a right; or

2. (2)

   seeks to exercise a right;

to realise a private customer's assets in order to discharge an obligation of that private customer which arises from designated investment business conducted by the firm.

A firm must not realise a private customer's assets unless it is legally entitled to do so, and it has either:

1. (1)

   set out in the terms of business provided to the private customer in accordance with COB 4.2.5 R (Requirement to provide terms of business to a customer) (or a client agreement entered into in accordance with COB 4.2.7 R (Requirement to enter into a client agreement with a private customer)):

   1. (a)

      the action it may take to realise any assets of the private customer;

   2. (b)

      the circumstances in which it may do so; and

   3. (c)

      each asset (if relevant) or type or class of asset over which it may exercise the right; or

2. (2)

   given the private customer notice (oral or written) of its intention to exercise its rights at least three business days before it does so.

This section applies to a firm when it lends money or grants credit to a private customer or arranges for any other person to do so, in the courseof, or in connection with, its designated investment business.

A firm, subject to the exceptions in COB 7.9.5 R, must not lend money or grant credit to a private customer (or arrange for any other person to do so) in the course of, or in connection with, its designated investmentbusiness unless:

1. (1)

   the firm has made and recorded an assessment of the private customer's financial standing, based on information disclosed by the private customer;

2. (2)

   the firm has taken reasonable steps to ensure that the arrangements for the loan or credit and the amount concerned are suitable, based on the information disclosed by the private customer, for the type of investment agreement proposed or which the private customer is likely to enter into; and

3. (3)

   the private customer has given his prior written consent to both the maximum amount of the loan or credit and the amount or basis of any interest or fees to be levied in connection with the loan or credit.

COB 7.9.3 R does not apply when:

1. (1)

   a firm settles a securities transaction of the private customer because he has failed to pay or has paid late; or

2. (2)

   a firm covers a margin call made on a private customer for a period of no longer than five business days; or

3. (3)

   a long-term insurer lends money or grants credit to a private customer, or arranges for any other person to do so, in connection with a life policy. 1

A firm must make a record of the information about the private customer's financial standing upon which the assessment required by COB 7.9.3 R (1) was made, including the date on which the information was last updated or checked, and retain the record for three years from the date on which the credit arrangements ceased.

This section applies to a firm which executes a transaction in a contingent liability investment with or for a private customer, in the course of, or in connection with, its designated investment business.

1. (1)

   A firm must obtain from a private customer any margin payable, whether at the outset or subsequently, by or to the firm, for a transaction in a contingent liability investment.

2. (2)

   The minimum margin to be obtained from a private customer in accordance with (1) for an on-exchange transaction in a contingent liability investment is an amount or value equal to the margin requirements of the relevant exchange or clearing house.

A firm must close out a private customer's open position if that customer fails to meet a margin call made for that position for five business days following the date on which the obligation to meet the call accrues, unless:

1. (1)
   1. (a)

      the firm has received confirmation from a relevant third party that the private customer has given instructions to pay in full; and

   2. (b)

      the firm has taken reasonable care to establish that the delay in its receipt is owing to circumstances beyond the private customer's control; or

2. (2)

   the firm makes a loan or grants credit to the private customer to enable that customer to pay the full amount of the margin call in accordance with the requirements of COB 7.9.3 R (Restrictions on lending to private customers).

This section applies to a firm that conducts designated investment business with or for a privatecustomer and:

1. (1)

   sells to the customer any security that is not traded on a recognised investment exchange, a designated investment exchange or any regulated market; and

2. (2)

   holds itself out as a market maker in that security.

A firm must:

1. (1)

   give written notice to a private customer, no later than the time of sale, that:

   1. (a)

      a reasonable price for repurchase of the security will be available to the private customer for a period, specified in that notice, that must not be less than three months from the date the notice is given; and

   2. (b)

      sale by the private customer of the security after the end of that period may be difficult due to the nature and possible illiquidity of the security; and

2. (2)

   ensure that a reasonable price is available to the private customer for the duration of the period specified in the notice.

This section applies to a firm that:

1. (1)

   receives (or, in the exercise of its discretion, decides upon) a customer order;

2. (2)

   executes a customer order;

3. (3)

   passes a customer order to another person for execution; or

4. (4)

   in addition to (1), (2) or (3), also executes own account transactions;

in any designated investment other than a life policy.

A firm must ensure by the establishment and maintenance of appropriate procedures that it promptly records adequate information in relation to the events in COB 7.12.1 R, including any own account transactions.

A firm must retain the records referred to in COB 7.12.3 R for a period of at least three years after the date of the event in the left-hand column of COB 7.12.6 E.

This section applies to a firm that conducts designated investment business.

A firm must take reasonable steps to ensure that:

1. (1)

   a personal account transaction in a designated investment undertaken by any of its employees does not conflict with the firm's duties to its customers under the regulatory system, unless COB 7.13.6 R applies; and

2. (2)

   when it permits an employee to undertake a personal account transaction in a designated investment in relation to which the firm conducts designated investment business, or in any related investment, it receives prompt notification of, or is otherwise able to identify, that transaction.1

COB 7.13.4 R does not apply to:

1. (1)

   an employee who is a sole trader whose regulated activities consist only of own account transactions; or

2. (2)

   an employee, if the firm has taken reasonable steps to determine that the employee will not be involved to any material extent in, or have access to information about, the firm'sdesignated investment business. Firms are reminded that there are further provisions relating to the management and activities of investment analysts in COB 7.16.

1. (1)

   A firm must make a record of:

   1. (a)

      the restrictions upon personal account dealing and the basis upon which any permission to deal is made;

   2. (b)

      each permission given by it under COB 7.13.4 R (2) ;

   3. (c)

      each notification made to it under COB 7.13.4 R (2) ;

   4. (d)

      in respect of COB 7.13.6 R (2), the basis upon which the firm has determined that an employee will not be involved in, or have access to information about, the firm'sdesignated investment business; and

   retain these records for the minimum period specified in (2), (3) or (4), as the case may be.

2. (2)

   In relation to a record under (1)(a), the period is three years from the date that the restrictions or basis were communicated to the employee.

3. (3)

   In relation to each permission and notification in (1)(b) and (c), the period is three years from the date that the permission or notification was made.

4. (4)

   In relation to a record under (1)(d), the period is three years after the date on which the individual ceases to be an employee.

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

Subject to COB 7.15.4 R, a firm must not, as agent or principal, enter into a non-market-price transaction under which it deals in a designated investment with or for a customer, unless it has taken reasonable steps to ensure that the transaction is not being entered into by the customer for an improper purpose.

COB 7.15.3 R does not apply to a non-market-price transaction if it is subject to the rules of a recognised investment exchange.

1This section applies to a firm that prepares investment research for publication or distribution to its clients, or that publishes or distributes investment research to its clients.

1. (1)

   1This rule applies to a firm that publishes or distributes investment research and where either:

   1. (a)

      the firm holds it out (in whatever terms) as being an impartial assessment of the value or prospects of its subject matter; or

   2. (b)

      it is reasonable for those to whom the firm has published or distributed it to rely on it as an impartial assessment of the value or the prospects of its subject matter.

2. (2)

   If this rule applies, a firm must:

   1. (a)

      establish and implement a policy, appropriate to the firm, for managing effectively the conflicts of interest which might affect the impartiality of investment research of the type described in (1);

   2. (b)

      make a record of the policy and retain it until at least three years after it ceases to have effect;

   3. (c)

      take reasonable steps to ensure that it and its employees comply with the policy;

   4. (d)

      make available to any person in writing, on request, a copy of the policy (for example, by including it on an appropriate website); and

   5. (e)

      take reasonable steps to ensure that the policy remains appropriate and effective.

3. (3)

   The policy must identify the types of investment research to which it applies, and must make provision for systems, controls and procedures (making clear the extent to which the firm's policy relies on Chinese walls or other information barriers within the firm):

   1. (a)

      to identify conflicts of interest which might affect the impartiality of the investment research to which the policy relates; and

   2. (b)

      to manage effectively conflicts of interest, to the extent that they arise or might arise within the firm, in relation to at least the following:

      1. (i)

         the supervision and management of investment analysts;

      2. (ii)

         the remuneration structure for investment analysts;

      3. (iii)

         the extent to which investment analysts may become involved in activities other than the preparation of the investment research;

      4. (iv)

         the extent to which (if at all) inducements offered by issuers, or others with material interest in the subject matter of investment research, may be accepted by investment analysts or senior employees of the firm;

      5. (v)

         who may comment on draft investment research before publication, and the process for taking account of their comments;

      6. (vi)

         the timing and manner of publication and distribution of investment research and of the communication of its substance; and

      7. (vii)

         what information or disclosures are appropriate to include in the investment research (taking due account of matters required by law).

1. (1)

   This section applies to a firm that prepares or disseminates research recommendations.

2. (2)

   This section does not apply to the extent that the Investment Recommendation (Media) Regulations 2005 apply to a firm.

3. (3)

   If a firm is a media firm subject to equivalent appropriate regulation only COB 7.17.2 G, COB 7.17.3 G, COB 7.17.5 R, COB 7.17.16 R and COB 7.17.17 R apply. [Note: Articles 2(4), 3(4), 5(5) 2003/125/EC]

1A firm must take reasonable care:

1. (1)

   to ensure that a research recommendation produced or disseminated by it is fairly presented; and

2. (2)

   to disclose its interests or indicate conflicts of interest concerning relevant investments. [Note: Article 6(5) Market Abuse Directive]

1. (1)

   1A firm must, in a research recommendation produced by it:

   1. (a)

      disclose clearly and prominently the identity of the person responsible for its production, and in particular:

      1. (i)

         the name and job title of the individual who prepared the research recommendation; and

      2. (ii)

         the name of the firm; and

   2. (b)

      include the relevant status disclosure specified in GEN 4 Annex 1 RR.

2. (2)

   The requirements in (1) may be met for non-written research recommendations by referring to a place where the disclosures can be directly and easily accessed by the public, such as an appropriate internet site of the firm. [Note: Article 2 2003/125/EC]

1. (1)

   1A firm must take reasonable care to ensure that:

   1. (a)

      facts in a research recommendation are clearly distinguished from interpretations, estimates, opinions and other types of non-factual information;

   2. (b)

      its sources for a research recommendation are reliable or if there is any doubt as to whether a source is reliable, this is clearly indicated;

   3. (c)

      all projections, forecasts and price targets in a research recommendation are clearly labelled as such and the material assumptions made in producing or using them are indicated; and

   4. (d)

      the substance of its research recommendations can be substantiated as reasonable, upon request by the FSA.

2. (2)

   The requirements in (1) do not apply, in the case of non-written research recommendations, to the extent that they would be disproportionate.

3. (3)

   A firm must make and retain sufficient records to disclose the basis of the substantiation required in (1)(d). [Note: Article 3 2003/125/EC]

1. (1)

   1In addition a firm must take reasonable care to ensure that, in a research recommendation, at least:

   1. (a)

      all substantially material sources are indicated, including, if appropriate, the issuer, and in particular the research recommendation indicates whether the research recommendation has been disclosed to that issuer and amended following this disclosure before its dissemination;

   2. (b)

      any basis of valuation or methodology used to evaluate a security, a derivative or an issuer, or to set a price target for a security or a derivative, is adequately summarised;

   3. (c)

      the meaning of any recommendation made, such as "buy", "sell" or "hold", which may include the time horizon of the security or derivative to which the research recommendation relates, is adequately explained and any appropriate risk warning, including a sensitivity analysis of the relevant assumptions, indicated;

   4. (d)

      reference is made to the planned frequency, if any, of updates of the research recommendation and to any major changes in the coverage policy previously announced;

   5. (e)

      the date at which the research recommendation was first released for distribution is indicated clearly and prominently, as well as the relevant date and time for any security or derivative price mentioned; and

   6. (f)

      if the substance of a research recommendation differs from the substance of an earlier research recommendation, concerning the same security, derivative or issuer issued during the 12-month period immediately preceding its release, this change and the date of the earlier research recommendation are indicated clearly and prominently.

2. (2)

   If the requirements in (1)(a), (b) or (c) would be disproportionate in relation to the length of the research recommendation, a firm may, instead, make clear and prominent reference in the research recommendation to the place where the required information can be directly and easily accessed by the public (such as a hyperlink to that information on an appropriate internet site of the firm) provided that there has been no change in the methodology or basis of valuation used.

3. (3)

   In the case of a non-written research recommendation, the requirements of (1) do not apply to the extent that they would be disproportionate. [Note: Article 4 2003/125/EC]

1. (1)

   A firm must disclose, in a research recommendation:

   1. (a)

      all of its relationships and circumstances that may reasonably be expected to impair the objectivity of the research recommendation, in particular a significant financial interest in any relevant investment which is the subject of the research recommendation, or a significant conflict of interest with respect to a relevant issuer; and

   2. (b)

      relationships and circumstances, of the sort referred to in (a), of each legal or natural person working for the firm who was involved in preparing the substance of the research recommendation, including, in particular, for a firm which is an investment firm, disclosure of whether his remuneration is tied to investment banking transactions performed by the firm or any affiliated company.

2. (2)

   If the firm is a legal person, the information to be disclosed in accordance with (1) must at least include the following:

   1. (a)

      any interests or conflicts of interest of the firm or of an affiliated company that are accessible, or reasonably expected to be accessible, to the persons involved in the preparation of the substance of the research recommendation; and

   2. (b)

      any interests or conflicts of interest of the firm or of affiliated companies known to persons who, although not involved in the preparation of the substance of the research recommendation, had or could reasonably be expected to have access to the substance of the research recommendation prior to its dissemination, other than persons whose only access to the research recommendation is to ensure compliance with relevant regulatory or statutory obligations, including the disclosures required under COB 7.17.

3. (3)

   If the disclosures required under (1) and (2) would be disproportionate in relation to the length of the research recommendation distributed, a firm may, instead, make clear and prominent reference in the research recommendation to the place where such disclosures can be directly and easily accessed by the public (such as a hyperlink to the disclosure on an appropriate internet site of the firm).

4. (4)

   The requirements in (1) do not apply, in the case of non-written research recommendations, to the extent that they are disproportionate. [Note: Article 5 2003/125/EC]

1. (1)

   1A research recommendation produced by a firm must disclose clearly and prominently the following information on its interests and conflicts of interest:

   1. (a)

      major shareholdings that exist between it or any affiliated company on the one hand and the relevant issuer on the other hand, including at least:

      1. (i)

         shareholdings exceeding 5 % of the total issued share capital in the relevant issuer held by the firm or any affiliated company, or

      2. (ii)

         shareholdings exceeding 5 % of the total issued share capital of the firm or any affiliated company held by the relevant issuer;

   2. (b)

      any other financial interests held by the firm or any affiliated company in relation to the relevant issuer which are significant in relation to the research recommendation;

   3. (c)

      if applicable, a statement that the firm or any affiliated company is a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives;

   4. (d)

      if applicable, a statement that the firm or any affiliated company has been lead manager or co-lead manager over the previous 12 months of any publicly disclosed offer of securities of the relevant issuer or in any related derivatives;

   5. (e)

      if applicable, a statement that the firm or any affiliated company is party to any other agreement with the relevant issuer relating to the provision of investment banking services, provided that:

      1. (i)

         this would not entail the disclosure of any confidential commercial information; and

      2. (ii)

         the agreement has been in effect over the previous 12 months or has given rise during the same period to a payment or to the promise of payment; and

   6. (f)

      if applicable, a statement that the firm or any affiliated company is party to an agreement with the relevant issuer relating to the production of the research recommendation.

2. (2)

   A firm must disclose, in general terms, in the research recommendation the effective organisational and administrative arrangements set up within the firm for the prevention and avoidance of conflicts of interest with respect to research recommendations, including information barriers.

3. (3)

   In the case of an investment firm or a credit institution, if a legal or natural person working for the firm who is involved in the preparation of a research recommendation, receives or purchases shares of the relevant issuer prior to a public offering of those shares, the price at which the shares were acquired and the date of acquisition must also be disclosed in the research recommendation.

4. (4)

   A firm, which is an investment firm or a credit institution, must publish the following information on a quarterly basis, and must disclose it in its research recommendations:

   1. (a)

      the proportion of all research recommendations published during the relevant quarter that are "buy", "hold", "sell" or equivalent terms; and

   2. (b)

      the proportion of relevant investments in each of these categories, issued by issuers to which the firm supplied material investment banking services during the previous 12 months.

5. (5)

   If the requirements under (1) to (4) would be disproportionate in relation to the length of the research recommendation, a firm may, instead, make clear and prominent reference in the research recommendation to the place where such disclosure can be directly and easily accessed by the public (such as a hyperlink to the disclosure on an appropriate internet site of the firm, or, if relevant, to the document published under COB 7.16.5 R (2)).

6. (6)

   In the case of non-written research recommendations, the requirements of (1) do not apply to the extent that they are disproportionate. [Note: Article 6 2003/125/EC]

1If a firm disseminates a research recommendation produced by a third party, the research recommendation must identify the firm clearly and prominently. [Note: Article 7 2003/125/EC]

1. (1)

   1If a research recommendation produced by a third party is substantially altered before dissemination by a firm:

   1. (a)

      the disseminated material must clearly describe that alteration in detail; and

   2. (b)

      if the substantial alteration consists of a change of the direction of the recommendation (such as changing a "buy" recommendation into a "hold" or "sell" recommendation or vice versa), the requirements laid down in COB 7.17.6 R to COB 7.17.12 G on producers must be met by the firm, to the extent of the substantial alteration.

2. (2)

   A firm which disseminates a substantially altered research recommendation must have a formal written policy so that the persons receiving the information may be directed to where they can have access to the identity of the producer of the research recommendation, the research recommendation itself and the disclosure of the producer's interests or conflicts of interest, provided that these elements are publicly available.

3. (3)

   If a firm disseminates a summary of a research recommendation produced by a third party, it must:

   1. (a)

      ensure that the summary is fair, clear and not misleading;

   2. (b)

      identify the source research recommendation; and

   3. (c)

      identify where (to the extent that they are publicly available) the third party's disclosures relating to the source research recommendation can be directly and easily accessed by the public.

4. (4)

   Paragraphs (1) and (2) do not apply to news reporting on research recommendations produced by a third party where the substance of the research recommendation is not altered. [Note: Article 8 2003/125/EC]

1If a firm, which is an investment firm or a credit institution, disseminates a research recommendation produced by a third party:

1. (1)

   the relevant status disclosure specified in GEN 4 Annex 1 R for the firm must be clearly and prominently indicated on the disseminated material;

2. (2)

   if the producer of the research recommendation has not already disseminated it, the requirements in COB 7.17.11 R must be met by the firm as if it had produced the research recommendation itself; and

3. (3)

   if the firm has substantially altered the research recommendation, the requirements laid down in COB 7.17.5 R to COB 7.17.11 R must be met by the firm as if it had produced the research recommendation itself. [Note: Article 9 2003/125/EC]

1. (1)

   This section applies to a firm that acts as an investment manager when it executescustomer orders that relate to the designated investments specified in (2).

2. (2)

   The designated investments for the purposes of (1) are:

   1. (a)

      shares; and

   2. (b)
      1. (i)

         warrants;

      2. (ii)

         certificates representing certain securities;

      3. (iii)

         options; and

      4. (iv)

         rights to or interests in investments of the nature referred to in (i) to (iii);

      to the extent that they relate to shares.

1. (1)

   An investment manager must not executecustomer orders under arrangements coming within (2), unless the conditions in (3) are satisfied.

2. (2)

   The arrangements referred to in (1) are that the investment manager:

   1. (a)

      executes its customer orders through a broker or another person;

   2. (b)

      passes on the brokers or other person'scharges (whether commission or otherwise) to its customers; and

   3. (c)

      in return for the charges referred to in (b), receives goods or services in addition to the execution of its customer orders.

3. (3)

   The conditions referred to in (1) are that the investment manager has reasonable grounds to be satisfied that the goods or services in (2)(c):

   1. (a)
      1. (i)

         are related to the execution of trades on behalf of the investment manager'scustomers; or

      2. (ii)

         comprise the provision of research; and

   2. (b)

      will reasonably assist the investment manager in the provision of its services to its customers on whose behalf the orders are being executed and do not, and are not likely to, impair compliance with the duty of the investment manager to act in the best interests of its customers.

1. (1)

   If an investment manager enters into arrangements for the receipt of goods or services that relate to the execution of trades or the provision of research in accordance with COB 7.18.3 R (Use of dealing commission to purchase goods or services), it must in a timely manner make adequate:

   1. (a)

      prior disclosure; and

   2. (b)

      periodic disclosure;

   to its customers of the arrangements entered into.

2. (2)

   The adequate disclosure in (1) 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.

COB 2.2.3 R (Prohibition of inducements) does not apply to an investment manager that complies with the requirements of this section in receiving goods or services in accordance with COB 7.18.3 R (Use of dealing commission to purchase goods or services).

An investment manager must make a record of each periodic disclosure it makes to its customers in accordance with COB 7.18.12 R and must maintain each such record for at least five years from the date on which it is provided.