COB TP 1 COB TR 1 Transitional Rules for pre-N2 and ex-Section 43 firms

1.0

Application

1.1

These transitional provisions apply to:

(a)

pre-N2 firms; and

(b)

ex-section 43 firms.

2.0

Purpose

2.1

G

The FSA is aware that the introduction of COB will impose an additional compliance burden on firms, even when there is an underlying continuity of policy. The FSA wishes to lighten that burden in a manner consistent with its regulatory objectives and the principles of good regulation under the Act. The following rules provide transitional relief which takes three distinct forms:

(a)

extra time provisions (ETPs) which, in practice, give firms additional time after commencement to complete their preparations for the impact of certain provisions in COB;

(b)

technical timing provisions (TTPs) which give relief from certain provisions in COB that require firms to fulfil obligations to customers at periodic intervals. TTPs postpone the impact of these provisions in COB in relation to periods that span N2; and

(c)

timeless (saving) provisions (TSPs) which give firms relief for an indefinite period after N2 from certain provisions in COB relating mainly to terms of business and client agreements COB 4.2 and from provisions in the Handbook generally (including COB) relating to client classification. TSPs allow firms to continue to use, or rely upon, documentation or compliance work that was undertaken in accordance with previous regulator rules in relation to existing clients at N2.

2.2

G

If a firm's permitted regulated activities are subject to one or more of the transitional provisions in COB , and were carried on before commencement, those regulated activities should be interpreted, where appropriate, as if they were authorised investment business before commencement.

2.3

G

GEN contains some technical transitional provisions that apply throughout the Handbook and which are designed to ensure a smooth transition at commencement. These include transitional provisions relevant to record keeping and notification rules.

2.4

G

For the avoidance of doubt, COB TP 1.2, COB TP 1.2 and COB TP 1.2 at COB TP 1.2 override paragraph 9 (Time starting before commencement) of the technical timing provisions in GEN.

2.5

G

SUP contains transitional provisions, which carry forward written concessions relating to pre-commencement provisions.

3.0

Continuity of contracts

3.1

G

The FSA is sometimes asked whether a firm should re-negotiate contracts to replace references to its authorisation status or regulatory provisions made under predecessor legislation with references to its status or regulatory provisions made under the Act . Clearly, whether a firm should renegotiate its contracts is a matter for the firm , which needs to be considered in the light of the effect of the contractual provision as a whole. As a general rule, unless the FSA has made particular requirements relating to such matters, the FSA would not expect to see this done for regulatory reasons. Firms may wish to consider whether they need appropriate professional advice.

3.2

G

Clearly, the interpretation of contractual provisions is a matter for the courts. However, where a firm continues, as a result of the grandfathering process, to enjoy permission which provides it with authority under the Act to carry on regulated activities substantially similar to the investment business it could carry on under its authorisation under predecessor legislation, the FSA would be surprised if a court were to conclude that updating a contractual provision was necessary to enable it to give effect to the intentions of the parties to the contract.

4.0

Definitions

4.1

R

In these transitional provisions the following words are to have the meaning given to them below:

"corresponding rule" means a rule of the previous regulator of a firm that is substantially similar in purpose and effect to the relevant provision in COB.

"section 43 business" means activities in respect of which the firm would have been an exempted person under section 43 of the Financial Services Act 1986.

"pre-N2firm" means:

(a)

a firm which immediately before commencement was authorised under the Financial Services Act 1986 to carry on investment business in the United Kingdom by virtue of its membership of:

(i)

IMRO;

(ii)

PIA; or

(iii)

SFA;

(b)

a firm which immediately before commencement held an authorisation granted directly by the FSA under the Financial Services Act 1986 to carry on investment business in the United Kingdom immediately before commencement; or

(c)

an employee of such a firm in (a) or (b), including any of its appointed representatives (as defined under section 44 of the Financial Services Act 1986);

but does not include:

(d)

an ex-RPB firm; or

(e)

a firm in relation to its section 43 business.

"transitional period" means the period starting on commencement and finishing on midnight on 30 June 2002, except where otherwise specified.

1.0

Extra time provisions

1.1

ETP1

R

Transitional relief

(1) commencement to 30 June 2002, except as specified in (2) and (3) below;

(2) for COB 9.3.105R, from commencement to 31 December 2002;

(3) for COB 3.9.10 R, COB 6.1 to COB 6.8, until a date yet to be specified.14

commencement5

(1)

A pre-N2 firm will not contravene any of the provisions labelled ETP1 in COB TP 1.3 to the extent that, on or after commencement, it is able to demonstrate that it has complied with the corresponding rule of its previous regulator or, where applicable, the relevant former statutory requirement, subject to any modification, wherever appropriate, to take account of the passing of the Act.14

(2)

Paragraph (1) does not apply to the following:

(a)

(from 1 September 2002) COB 6.1.1 (5) to COB 6.1.1 (6) (Application);

(b)

(from 1 September 2002) COB 6.5.50 to COB 6.5.52 (Life policies: requests for quotations for surrender values);

(c)

(from 1 September 2002) COB 6.5.53 to COB 6.5.56 (Open market option).

(d)

(from 1 August 2002) COB 6.5.40 (3)(k) (Further information for life policies, schemes, insurance or equity ISAs, PEPs and stakeholder pensions);

(e)

(from 1 August 2002) COB 6.5.8 to COB 6.5.9 (Stakeholder pension schemes: decision trees);7

(f)

(from 6 April 2003) COB 6.6.51 (b) (Rate of return assumptions), COB 6.6.83 (Assumptions for pension annuities), COB 6.6.84 (Assumptions for pension annuities), COB 6.6.90 (3) and COB 6.6.91 (Required assumptions);8

(g)

(from 1 November 2002) COB 6.5.40 (3)(m) (Further information for life policies, schemes, insurance or equity ISAs, PEPs and stakeholder pensions);119

(h)11

(from 1 April 2004) COB 6.1.1A (Application of COB 6.2.26);11

(i)11

(from 1 April 2004) COB 6.2.26 (Requirement to offer a simplified prospectus for section 264 schemes); and11

(j)11

(from 1 April 2004 for a mini cash ISA for the tax year 2004/2005 and later tax years) COB 6.5.42 (14) (Information requirements for cash deposit ISAs, friendly society tax-exempt policies, traded life policies and broker funds);1112

(k)12

(from 9 October 2004) any rule in COB inserted or amended by the Distance Marketing Directive Instrument 2004 and, in the case of an amendment, to the extent of such amendment;1213

(l)13

(from 31 October 2004) any rule in COB inserted or amended by the Long-Term Care Insurance Contracts Instrument 2004 and, in the case of an amendment, to the extent of such amendment.13

1.1A

ETP1 (for COB 6.1 - COB 6.8)

G

(1)

The FSA is extending transitional relief for COB 6.1 - COB 6.8 and various other rules in COB, pending the outcome of the review of product disclosure and polarisation. As each of those reviews are completed, the transitional provisions will be revoked or modified to provide an appropriate transition into the new regime. Firms will be given notice of any revocation or modification as part of consultation on the new regime.

commencement until a date yet to be specified.

875

(2)

Interim changes to these rules may not benefit from this transitional relief.

1.2

ETPs 1 to 9

TTPs 1 to 3

TSPs 1 to 7

G

It is for a pre-N2 firm to satisfy itself that it has complied with the corresponding rule of its previous regulator or, where applicable, the relevant former statutory requirement. In order to benefit from the relief, a firm must ensure that the rule of its previous regulator which it proposes to comply with is substantially similar to the provision in COB to which it relates.

for ETP 1 as for COB TP 1.1

for ETP 2 to 9 and TTP 1 to 3 commencement to 30 June 2002

commencement5

For the assistance of firms , the FSA has compiled tables of derivations indicating the rules of a firm's previous regulator that correspond to the provision in COB being transitioned. Firms may wish to refer to these tables but in doing so should understand that they are not intended to be exhaustive and are produced merely as a guide.

Firms are advised that should they wish to take advantage of the transitional provisions set out in this section, the onus is on the firm to be able to demonstrate that in any given case it has in fact complied with the corresponding rules of its previous regulator or, as the case may be, the former statutory requirement.

1.3

ETPs 1 to 9

TTPs 1 to 3

TSPs 1 to 7

G

Firms will have noted from the wording of COB TP 1.1 that they should treat the corresponding rules of their previous regulator as modified to the extent necessary to ensure that the provision can operate effectively notwithstanding the enactment of the Act. Firms will need to adopt a common sense approach in interpreting the corresponding rules of their previous regulator and modify them accordingly. For example, references in such rules to a firms previous regulator should be read as if they referred to the FSA. Other modifications may not be as straightforward, such as where the concept of an indirect customer is not carried forward under the new legislation. In cases of difficulty, firms are encouraged to approach the FSA for its views.

for ETP 1 as for COB TP 1.1

for ETP 2 to 9 and TTP 1 to 3 commencement to 30 June 2002

indefinitely for TSPs

commencement5

1.4

ETP2

[deleted]

1

1.5

ETP1

G

(1)

Firms are reminded that under article 74 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 a financial promotion which has been approved before commencement in accordance with pre-commencement provisions or the financial promotion rules may be communicated by an unauthorised person for one month from commencement.

commencement to 30 June 2002

commencement1

(2)

Firms should take reasonable steps to avoid communicating a non-real time financial promotion which, through the passage of time, has become misleading. In such circumstances the promotion is unlikely to be in compliance with the rules of its previous regulator.

1.6

ETP3

R

Client classification

(1)

This rule applies only in relation to a client of a pre-N2 firm which the firm had classified as an expert private customer before commencement.

commencement to 30 June 2002

commencement

(2)

A pre-N2 firm will not contravene any of the provisions labelled ETP3 in Table COB TP 1.3 to the extent that, on or after commencement, it complies with (3).

commencement to 30 June 2002

commencement

(3)

For the purpose of COB 4.1, a pre-N2 firm which before commencement has classified a client as an expert private customer in accordance with the corresponding rule of its previous regulator , must treat that client as:

(a)

a private customer; or

(b)

an intermediate customer;

from commencement until the date of expiry of the transitional period, by which time it must classify the client in accordance with COB 4.1.

1.7

ETP3

G

Pre-N2 firms should note that COB TP 1.1 only applies to their clients who were clients at N2 (existing clients). The requirements of COB 4.1 apply in full in relation to any new client of the firm. Clients falling within the scope of COB TP 1.1 will retain their rights of access to the firm's complaint handling procedures and the Financial Ombudsman Service under DISP.

commencement to 30 June 2002

commencement

1.8

ETP4

R

(1)

An ex-section 43 firm will not contravene any of the provisions labelled ETP4 in Table COB TP 1.3 in relation to its section 43 business to the extent that, on or after commencement, it complies with (2).

commencement to until 30 November

commencement53

(2)

For the purposes of COB 4.1, an ex-section 43 firm may treat its client (other than another firm) who was a client of the firm before commencement as a market counterparty in relation to its section 43 business until the date of expiry of the transitional period , by which date it must classify the client in accordance with COB 4.1.

1.9

ETP4

G

An ex-section 43 firm that wishes to take advantage of the transitional relief provided by COB TP 1.1 should continue to maintain the standard of care set out in paragraphs 31 to 37 of the London Code of Conduct (version June 1999) in relation to each of their clients. For these clients, the FSA will maintain the arbitration procedures set out in paragraph 120 of the London Code of Conduct for disputes arising during the transitional period.

commencement until 30 November 2002

commencement5

1.10

ETP5

R

Client AssetsFor the purposes of any of the provisions labelled ETP5 in Table COB TP 1.3, the following will apply from commencement until the date of expiry of the transitional period:

commencement until 30 June 2002

commencement5

(a)

any reference in COB 9 to an approved bank must be treated as if it were a reference to an institution which satisfied the definition of "approved bank" under the corresponding rules of a firm's previous regulator; and

(b)

any reference in COB 9 to a custodian must be treated as if it were a reference to an institution which satisfied the definition of "custodian" under the corresponding rules of a firm's previous regulator.

5

1.11

ETP6

R

No corresponding rules A pre-N2 firm need not comply with any of the provisions labelled ETP6 in Table COB TP 1.3 until the date of expiry of the transitional period.

commencement until 30 June 2002

commencement5

1.12

ETP7

R

Client Money

An ex-section 43 firm need not comply with the provisions labelled ETP7 in Table COB TP 1.3 in relation to its section 43 business until the expiry of a period of 12 months following commencement, provided it continues to comply with the requirements of the Grey Paper (version June 1999), as published by the FSA, relating to the segregation of money and other assets belonging to counterparties.

until a date yet to be specified

commencement54

1.13

ETP8

R

Information about the firm

(1)

Subject to (2), a pre-N2 firm or an ex-section 43 firm will not contravene any of the provisions labelled ETP8 in Table COB TP 1.3 in relation to any written material it has produced before commencement to the extent that, on or after commencement, it is able to demonstrate that it has provided information about itself, in any such material, in accordance with the corresponding rule of its previous regulator.

(pre-N2 firms): commencement until 30 June 2002

(ex-section 43 firms): commencement until 30 November 2002

commencement

(2)

A pre-N2 firm which, before commencement, was an appointed representative under the Financial Services Act 1986, but has now become an authorised person, must, if it wishes to take advantage of the transitional relief in (1), take reasonable steps to ensure that it does not mislead customers as to its status as an authorised person in any of the written material in (1).

51

1.14

ETP8

G

(1)

The purpose of COB TP 1.3 is to ensure that the firm does not incur unnecessary costs by having to withdraw or destroy written material produced before commencement . For the avoidance of doubt, where a firm prints a document on or after commencement, from a precedent held in electronic form, ETP8 will apply.

(pre-N2 firms): commencement until 30 June 2002

(ex-section 43 firms): commencement until 30 November 2002

commencement1

(2)

A statement that the firm is a 'representative' of another firm is unlikely, on its own to mislead. But if written materials refer to the firm as an appointed representative, reasonable steps under COB TP 1.1 could include notifying the firm's private customer of the change in its status to an authorised person; or modifying the firm's existing stationery.

5

1.15

ETP9

R

Group business disapplication for ex-IMRO firms and ex-SFA firms

Commencement until a date yet to be specified

commencement

(1)

This paragraph applies to a pre-N2 firm which immediately before commencement was a member of IMRO or SFA.

(2)

COB 1.3.1 R applies to an ex-IMRO firm in (1) as if it provided as follows:

"COB applies to firms with respect to the carrying on of:

(1)

all regulated activities except:

(a)

to the extent that a provision of COB provides for a narrower application; and

(b)

activities which fall within article 69 of the Regulated Activities Order (Groups and joint enterprises), notwithstanding, in respect of article 69, article 4(4) of that Order (Specified activities: general: investment firms); and

(2)

unregulated activities to the extent specified in any provision of COB.".

(3)

COB 1.3.1 R applies to an ex-SFA firm in (1) as if it provided as follows:

"COB applies to firm with respect to the carrying on of:

(1)

all regulated activities except:

(a)

to the extent that a provision of COB provides for a narrower application: and

(b)

in relation to all of COB other than COB 7.13 (Personal account dealing) and the rules in COB requiring records to be made and retained, activities which fall within article 69 of the Regulated Activities Order (Groups and joint enterprises), notwithstanding, in respect of article 69, article 4(4) of that Order (Specified activities: general: investment firms); and

(2)

unregulated activity to the extent specified in any provision of COB.".

542

1.16

ETP9

G

The purpose of ETP 9 is to carry forward for ex-IMRO firms and ex-SFA firms the former regulatory treatment of intra-group investment business, which is carried on in conjunction with investment business for third parties. The effect of that treatment was that under the IMRO rulebook the rules do not apply to the business done for group companies which fell within the group business exemption in paragraph 18 of Schedule 1 to the Financial Services Act 1986. The effect of that treatment under the SFA rulebook was that with the exception of the rules relating to compliance (of which the personal account dealing and record keeping rules are carried forward in COB) the conduct of business rules did not apply to the business done for group companies that fell within the group business exemption. Effectively it was only the non-group third party element of such firms' investment business that was subject to the relevant rules. COB would not have carried forward this group business disapplication for such firms, were it not for the introduction of ETP 9.

Note that during the transitional period the FSA will be consulting on its proposals how this issue should be treated in COB after 30 June 2002.

commencement to 30 June 2002

commencement42

2.0

Technical timing provisions

2.1

TTP1

R

Periodic disclosure of soft commission

A pre-N2 firm will not contravene any of the provisions labelled TTP1 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has made periodic disclosure required by COB 2.2.18 R (Periodic disclosure), in relation to the period in which commencement falls, in accordance with the corresponding rule of its previous regulator.

commencement to expiry of the relevant period

commencement6

2.2

TTP2

R

With-profits guides

A pre-N2 firm will not contravene any of the provisions labelled TTP2 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has produced, and made available, the with-profits guide required by COB 6.9.4 for the financial year in which commencement falls, in accordance with the corresponding rule of its previous regulator.

commencement to expiry of the relevant period

commencement

2.3

TTP3

R

Periodic statements

A pre-N2 firm will not contravene any of the provisions labelled TTP3 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has provided its customers with a periodic statement required by COB 8.2.4 (Requirement for a periodic statement) or a client statement required by COB 9.1 (Production and despatch of client statements) for the period in which commencement falls, in accordance with the corresponding rules of its previous regulator.

commencement to expiry of the relevant period

commencement1

2.4

TTP1, 2 and 3

G

Firms should note that the technical timing provisions set out at COB TP 1.1 operate on a one-off basis. Any future disclosure, with-profits guide or periodic statement relating to a period after the initial period in which commencement falls, will have to be made in accordance with the full requirements of the relevant provision in COB subject, wherever applicable, to the availability of other transitional relief.

commencement to expiry of the relevant period

commencement

3.0

Timeless (saving) provisions

3.1

TSP1

R

Confirmation of compliance and approval

A pre-N2 firm will not contravene any of the provisions labelled TSP1 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has carried out the confirmation exercise referred to in COB 3.6.1 R (Confirmation of compliance), for an investment advertisement issued or approved before commencement, in accordance with the corresponding rule of its previous regulator.

indefinitely

commencement

3.2

TSP2

R

Terms of business and client agreements

(1)

Subject to (2) and (3), a pre-N2 firm will not contravene any of the provisions in Table COB TP 1.3 labelled TSP2 to the extent that, on or after commencement, it is able to demonstrate that it has continued to use, or rely upon, terms of business (including a client agreement), or a soft commission agreement , given to, or made with, a client before the end of the transitional period in accordance with the corresponding rule of its previous regulator.

indefinitely

commencement

(2)

If the basis on which a pre-N2 firm conducts, or proposes to conduct, its designated investment business for a client changes after commencement in a way not contemplated by the original terms of business and where the original terms of business allow the firm to amend its terms without the customer's consent, the firm must provide the client with amended terms of business in accordance with COB 4.2.13 R (Amendment of terms of business).

(3)

A pre-N2 firm must take reasonable steps to ensure that a private customer to whom it has provided terms of business (including a client agreement ) before commencement is notified in writing of the matters set out in COB 4.2.15E (2), (21) and (22) as soon as practicable after commencement.

1

3.3

TSP2

G

(1)

Firms should note that COB 4.2 also benefits from an ETP1 as set out in COB TP 1.1. The purpose of this is to allow firms additional time, after commencement , to amend their terms of business for new clients taken on after N2.

indefinitely

commencement

(2)

Where a pre-N2 firm has started, but has not concluded, negotiating terms of business with a client before commencement, it may rely on COB TP 1.1 even if the terms of business are not agreed until after commencement.

(3)

COB TP 1.3 does not require the firm to provide a client with amended terms of business where the change in the terms was contemplated in the original terms of business.

(4)

Further to Principle 7 (Communications with clients) of the FSA's Principles for Business, a firm should not refuse a customer's reasonable request for new terms of business to reflect the new regime applicable under the Act.

(5)

A pre-N2 firm will comply with COB TP 1.1 if the firm gives written notification to the private customer as part of the firm's next routine communication to the customer. In most circumstances, the FSA expects that a period of between three and six months from commencement should give sufficient time for a pre-N2 firm to notify a private customer under this rule. For example, a pre-N2-firm might notify under COB TP 1.1 much sooner than six months after commencement when it provides private customers with risk warnings in respect of warrants and derivatives or non-readily realisable investments (COB 5.4 Customers' understanding of risk).

(6)

A pre-N2 firm's only routine communication with a private customer might occur more that six months after commencement. For example, a long-term insurer providing customers with the annual statement might only communicate with some customers (particularly 'dormant' customers) annually or less frequently. In such limited circumstances, a period of up to six months might be too restrictive an interpretation of the requirement to take reasonable steps to notify private customers as soon as practicable after commencement. This is exceptional and a period of up to six months from commencement will be sufficient in most cases.

(7)

The FSA wishes to minimise any unnecessary repetition or duplication of notifications flowing from COB TP 1.1. A pre-N2 firm acting under COB TP 1.1 may reasonably fulfil its notification obligation to a private customer through the pre-N2 firm's agent or intermediary who services the private customer and is authorised by the FSA, or through the pre-N2 firm'sappointed representative who services the private customer and for whom the pre-N2 firm is responsible as principal under section 39 of the Act (Exemption). But a pre-N2 firm will retain responsibility for fulfilling the notification requirement in COB TP 1.1.

(8)

COB TP 1.1 requires notification in writing. This may be done by using electronic media, subject to COB 1.8 (Application to electronic media). The requirement will not be discharged, however, simply by publishing a notice in a national or local newspaper.

5

3.4

TSP3

R

Know your customer and suitability

indefinitely (as regards (1) and (2))

commencement

(1)

Subject to (2), a pre-N2 firm will not contravene any of the provisions labelled TSP3 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has continued to use, or rely upon, a record of a private customer's personal and financial circumstances made in accordance with the corresponding rules of its previous regulator, and in doing so has had regard to the guidance set out in COB 5.2.6 G.

(2)

The relief in (1) will apply only so long as there is no relevant change in the customer's personal and financial circumstances.

(3)

Paragraph (2) applies only for relevant changes of which a firm ought reasonably to be aware assuming compliance with COB 5.2.5 R (Requirement to know your customer)

indefinitely from 1 January 2003 (as regards (3))10

3.5

TSP4

R

Suitability and customers' understanding of risk

A pre-N2 firm will not contravene any of the provisions labelled TSP4 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it uses, or relies upon, a suitability letter or, as the case may be, a risk warning or disclosure, given to a customer in accordance with the corresponding rule of its previous regulator, in relation to a transaction or series of transactionsexecuted or arranged before the expiry of the transitional period.

indefinitely

commencement

3.6

TSP4

G

Firms should note that the requirements in COB 5.2 and COB 5.3 relating to the production of suitability letters and risk warnings also benefit from an ETP1 provision.

indefinitely

commencement

3.7

TSP5

R

Scheme documents for an unregulated collective investment scheme

A pre-N2 firm that is an operator will not contravene any of the provisions labelled TSP5 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has continued to use, or rely upon, a scheme document provided to a participant before the expiry of the transitional period, in accordance with the corresponding rule of its previous regulator.

indefinitely

commencement

3.8

TSP6

R

Notice and consents

(1)

A pre-N2 firm will not contravene any of the provisions labelled TSP6 in Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, it has continued to use or rely upon a valid notice or consent which, before the expiry of the transitional period, was given to, given by or obtained from a client or counterparty in accordance with the corresponding rule of its previous regulator, or, where applicable, the relevant former statutory instrument.

indefinitely

commencement5

(2)

A pre-N2 firm will not contravene any of the provisions labelled TSP in the Table COB TP 1.3 to the extent that it is able to demonstrate that, on or after commencement, its auditors have provided its previous regulator with written confirmation of the type required by COB 9.3.42R (2)(a) in accordance with the corresponding rule of its previous regulator.

1

3.9

TSP7

R

Cancellation

The Financial Services (Cancellation) Rules 1994 and the Financial Services (Non-Life Cancellation) Rules 1997 continue to apply in respect of investment agreements, as defined in section 44(9) of the Financial Services Act 1986, entered into before commencement.

indefinitely

commencement

3.10

TSP7

G

COB 6.7 (Cancellation and withdrawal) applies in the case of an investment agreement entered into before commencement but which, on or after that date, is subsequently varied.

indefinitely

commencement

Chapter 1 Applications and general provisions

1.3 General application: what?

1.3.1R

ETP9

Chapter 2 Rules which apply to all firms conducting designated investment business

2.2 Inducements and soft commission

2.2.8R

Requirements when using a soft commission agreement

ETP1

TSP2

2.2.12R

Allowable benefits provided under a soft commission agreement

ETP1

2.2.16R

Prior disclosure

ETP1

2.2.18R

Periodic disclosure

TTP1

2.2.20R

Record keeping

TTP1

Chapter 3 Financial promotion (whole chapter)

ETP1

TSP7

3.6 Confirmation of compliance

3.6.1R

Confirmation of compliance

ETP1

TSP1

3.6.3R

Withdrawing confirmation

ETP1

TSP1

3.6.5R

Communicating a financial promotion where another firm has confirmed compliance

ETP1

TSP1

Chapter 4 Accepting customers

4.1 Client classification (whole section)

ETP3 ETP4

6

4.2 Terms of business and client agreements with customers (whole section)

ETP1

TSP2

Chapter 5 Advising and selling

5.2 Know your customer

5.2.5R

Requirement to know your customer

ETP1 ETP6

TSP3

5.2.9R

Record keeping: personal and financial circumstances

ETP1 ETP6

TSP3

5.2.10R

ETP1 ETP6

TSP3

5.3 Suitability

TSP4

5.3.5R

Requirement for suitability generally

ETP1

5.3.6R

Requirement for suitability: provider firms

ETP1

5.3.7R

ETP1 ETP6

5.3.9R

Requirement for suitability: independent intermediary

ETP1

5.3.14R

Requirement for a suitability letter

ETP1

5.3.19R

Exceptions from requirement to provide a suitability letter

ETP1 ETP6

5.3.20R

Suitability of broker funds

ETP1

5.3.21R

Suitability of pension transfers and opt-outs

ETP1

5.3.22R

ETP1 ETP6

5.3.23R

ETP1 ETP6

5.3.24R

ETP1

5.3.25R

ETP1

5.3.26R

ETP1 ETP6

5.3.27R

ETP1 ETP6

5.3.28R

Suitability of personal pension schemes: promotions to employees

ETP1 ETP6

5.4 Customers' understanding of risk

TSP4

5.4.3R

Requirement for risk warnings

ETP1

TSP4

5.5 Information about the firm

5.5.3R

Information required to be disclosed

ETP8

5.5.7R

Overseas business for UK private customers

ETP8

5.5.8R

Business conducted from an overseas place of business with overseas customers

ETP8

5.7 Disclosure of charges, remuneration and commission

5.7.3R

Disclosure of charges

ETP1

5.7.5R

Disclosure of remuneration and commission for packaged products

ETP1

5.7.9R

Exceptions to the disclosure for packaged products

ETP1

5.7.10R

ETP1

5.7.15R

ETP1

Chapter 6 Product disclosure and the customers' right to cancel or withdraw (whole chapter)

ETP1

TSP7

6.7 Cancellation and withdrawal (whole section)

ETP1

TSP6

6.9 With-profits guides (whole section)

TTP2

Chapter 7 Dealing and managing

7.15 Non-market-price transactions

7.15.3R

Non-market-price transactions

ETP6

7.15.4R

ETP6

Chapter 8 Reporting to customers

8.1 Confirmation of transactions

8.1.3R

Requirement to confirm a transaction

ETP1

8.1.6R

Exceptions to the requirement to despatch a confirmation

ETP1

8.1.7R

ETP1

8.1.8R

ETP1

8.1.11R

When a confirmation may omit certain information

ETP1

8.1.12R

When a transaction is treated as executed

ETP1

8.1.14R

Record keeping requirements

ETP1

8.2 Periodic statements

8.2.4R

Requirement for a periodic statement

ETP1

TTP3

8.2.6R

Exceptions from the requirement to provide a periodic statement

ETP1

TTP3

8.2.9R

Record keeping requirements

ETP1

TTP3

Chapter 9 Client assets (whole chapter)

ETP5 ETP7

9.1.35 (3)-(5)R

ETP1

TSP4 TSP6

9.1.38R

ETP1

9.1.40R

ETP1

TSP4 TSP6

9.1.48R

ETP1

TSP6

9.1.49R

ETP1

TSP2 TSP6

9.1.51R

ETP1

TSP2 TSP6

9.1.54R

Risk disclosures

ETP1

TSP4 TSP6

9.1.57R

ETP1

TSP4 TSP6

9.1.58R

ETP1

TSP4 TSP6

9.1.59R

Production and despatch of client statements

ETP1

TTP3

9.1.60R

TTP3

9.1.61R

TTP3

9.1.63R

ETP1

9.1.64R

Content of client statements

ETP1

9.1.65R

ETP1

9.1.69R

Custodian agreement

ETP1

TSP2

9.1.72R

Use of a safe custody investment: by the firm

ETP1

TSP6

9.1.73R

Use of a safe custody investment: by another client

ETP1

TSP6

9.1.74R

Stock lending

TSP2 TSP6

9.1.78R

ETP1

TSP6

9.1.79R

ETP1

TSP6

9.1.80R

ETP1

9.1.85R

Reconciliation: frequency of reconciliation

ETP1

9.1.89R

ETP1

9.1.93R

Reconciliation methods

ETP1

9.1.94R

Reconciliation discrepancies

ETP1

9.1.97R

Notification requirement

ETP1

9.1.98R

Records

ETP1

9.2 Mandates

9.2.1R

Application

ETP1

9.2.5R

General

ETP1

TSP6

9.3 Client money

9.3.2R

ETP1

TSP6

9.3.9R

TSP6

9.3.11R

TSP6

9.3.42R

TSP6

9.3.53R

Client entitlements

ETP6

9.3.55R

ETP6

9.3.56R

ETP6

9.3.60R

Interest

ETP6

TSP6

9.3.64(2)R

ETP6

TSP6

9.3.69R

TSP6

9.3.70R

TSP6

9.3.76R

ETP6

9.3.80R

Group banks

ETP6

TSP6

9.3.81R

ETP6

TSP6

9.3.82R

Notification and acknowledgement of trust (banks)

TSP6

9.3.84R

TSP6

9.3.86R

Notification and acknowledgement of trust (exchange, clearing house, intermediate broker or OTC counterparty)

TSP6

9.3.89R

ETP1 ETP6

TSP6

9.3.90R

Notification to client: use of an approved bank outside the United Kingdom

TSP6

9.3.95R

Notification to clients: use of an intermediate broker, settlement agent or OTC counterparty outside the United Kingdom

TSP6

9.3.97R

TSP6

9.3.100R

ETP1

9.3.101R

ETP1

9.3.105R

Client money requirement

ETP1

9.3.106R

General transactions

ETP1

9.3.107R (T)

This table belongs to COB 9.3.106R

ETP1

9.3.108R

ETP1

9.3.109R

ETP1

9.3.113R

Equity balance

ETP1

9.3.114R

ETP1

9.3.115R

Margined transaction requirements

ETP1

9.3.119R

Reduced client money requirement option

ETP1

9.3.121R

Failure to perform calculations

ETP1

9.3.122R

ETP1

9.3.123R

Reconciliation of client money balances: frequency of reconciliation

ETP1

9.3.125R

ETP1

9.3.135R

ETP6

9.3.136R

ETP6

9.3.138R

TSP6

9.5 Client money distribution (whole section)

ETP7

Chapter 10 Operators of collective investment schemes

10.3 Modification of the allocation rule

10.3.1R

ETP1

10.4 Suitability of the portfolio of an unregulated collective investment scheme

10.4.3R

ETP1

10.6 Scheme documents for an unregulated collective investment scheme

10.6.2R

Provision of scheme documents to private customers

ETP1

TSP5

10.6.5R

ETP6

TSP5

10.7 Periodic statements for an unregulated collective investment scheme (whole section)

ETP1

TTP3

1.0

Timeless (saving) provisions for the Handbook (including COB)

1.1

Rules in the Handbookunless the contrary intention appears

R

Client Classification

(1) This paragraph applies only to a pre-N2firm and in relation to any person who became a client of thefirmbefore commencement (in this rule referred to as an "existing client").

(2) If a firm before commencement classified an existing client, other than another firm or overseas financial services institution, as a market counterparty in accordance with the rules of its previous regulator, it will not contravene a rulein the Handbook by treating the client as a market counterparty, unless (3) applies.

(3) If the client in (2) has been classified as a market counterparty only in relation to a particular transaction or type of transaction, the firm must from commencement classify that client in accordance with COB 4.1.

(4) If a firm before commencement classified an existing client, other than another firm or overseas financial services institution, or a client withinCOB TR1 1.6, as a non-private customer in accordance with the rules of its previous regulator, it will not contravene a rule in the Handbook by treating that client as an intermediate customer.

(5) The firm may, notwithstanding (4), classify the client in (4) as a market counterparty provided the firm complies with COB 4.1.12 R (2) (Large intermediate customer classified as a market counterparty).

(6) If a firm beforecommencement classified an existing client, other than another firm or overseas financial services institution, as a private customer in accordance with the rules of its previous regulator, it will not contravene a rule in the Handbook by treating that client as a private customer.

(7) Thefirm may, notwithstanding (6), classify the client in (6) as an intermediate customer provided the firm complies with COB 4.1.9 R (Expert private customer classified as an intermediate customer).

(8) If a firm before commencement classified an existing client, other than another firm or overseas financial services institution, as an ordinary business investor in accordance with the rules of its previous regulator , it will not contravene a rule in the Handbook by treating that client as an intermediate customer.

indefinitely

varies depending on the rule concerned

1.2

Rules in the Handbook unless the contrary intention appears

G

Firms should note that COB TP 1.4 does not require them to take positive steps to re-classify clients falling within the scope of the rule at N2 for the purposes of compliance with COB 4.1.4 R (Requirement to classify). COB TP 1.4 has the effect of automatically re-classifying these clients except as otherwise stated.

indefinitely

varies depending on the rule concerned

1.3

Rules in the Handbook unless the contrary indication appears

G

There are no transitional rule regarding classification by a firm ("F") of a client who is a firm or overseas financial services institution ("C1"). In such cases the effect of COB 4.1.7 R is that C1 will be a market counterparty of F, unless COB 4.1.7 R (2) apply. If C1 wishes to be classified as an intermediate customer for inter-professional business from commencement, the requirement for agreement under COB 4.1.7 R (2)(c) could, for example, be satisfied if:(a) C1 notifies F in writing that it wishes to be classified as an intermediate customer for that purpose and that F's agreement will be implied if F continues to do business with C1 after commencement; and(b) F has not notified C1 in writing that it does not agree to that classification.

indefinitely

varies depending on the rule concerned

1.4

Rules in the Handbook unless the contrary intention appears.

G

For the assistance of firms , the FSA has prepared a client classification mapping table, which explains the link between pre-N2 client categories and the client classification in COB . This is to be found in Annex E of the Policy Statement on Transitional Arrangements for the Conduct of Business Sourcebook issued in July 2001.

1.5

Rules in the Handbook unless the contrary intention appears.

F

If a firm treats a client as a private customer , or as an intermediate customer , or as a market counterparty in accordance with COB TP 1.1 or COB TP 1.1, it will not contravene a rule in the Handbook by doing so.