COB TP3 Transitional Rules for ex-RPB firms

1.0

Application

1.1

R

This section applies to firms who are ex-RPB 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 where there is an underlying continuity of policy. The FSA wishes to lighten that burden in a manner consistent with its statutory objectives and the principles of good regulation under the Act. Transitional measures are being produced for parts of COB which take three distinct forms. First, firms are in practical terms being given additional time after the commencement day, until 30 November 2002, to complete their preparations for the impact of certain COB rules. Secondly, relief is being given in relation to certain rules that require firms to fulfil obligations to customers at periodic intervals, so as to postpone the impact of the COB provisions in relation to periods that span N2. Thirdly, firms are being given relief for an indefinite period after N2 for certain COB provisions so as to allow firms to continue to use, or rely upon, documentation or compliance work undertaken in accordance with rules of their previous regulator in relation to existing customers 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, TTP1 at COB TP 3.1 overrides paragraph 9 (Time starting before commencement ) of the technical timing provisions in GEN.

3.0

Continuity of contracts

3.1

G

The FSA is sometimes asked whether a firm should renegotiate contracts to replace references to its authorisation status under predecessor legislation with reference to its status 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 , however , the FSA would not expect to see this done for regulatory reasons.

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 does not view it as necessary to update the contractual provisions.

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.

"ex-RPB firm" means 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 a certificate from a recognised professional body under section 16 of the 1986 Act.

1.0

Extra time provisions

1.1

ETP1

R

Expired

1.2

ETPs 1 to 3 (inclusive)

TTP 1

TSPs 1 to 4 (inclusive)

G

It is for an ex-RPB firm to satisfy itself that it has complied with the corresponding rule of its previous regulator or, where applicable, 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 COB provision to which it relates. For the assistance of firms the FSA has compiled tables of derivations indicating the rules of a firm'sprevious regulator that correspond to the COB provisions being transitioned. Firms may wish to refer to these tables but in doing so should understand that they are not intended as exhaustive and are produced merely by way of a guide. Firms are advised that should they wish to take advantage of the transitional measures set out in this section, the onus is on them to be able to demonstrate that in any given case they have in fact complied with the corresponding rules of their previous regulators or, as the case may be, former statutory requirement.

commencement to 30 November 2002 (for ETPs and TTPs)Indefinitely (for TSPs)

commencement

1.3

ETPs 1 to 3( inclusive)

TTP 1

TSPs 1 to 4 (inclusive)

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 should modify them accordingly. For example, references in such rules to a firm's previous regulator should be read as if they referred to the FSA. Other modifications may not be as straightforward. In cases of difficulty, firms are encouraged to approach the FSA for its views.

commencement to 30 November 2002 (for ETPs and TTPs)Indefinitely (for TSPs)

commencement

1.4

ETP2

R

Expired

1.5

ETP2

G

Expired

1.6

ETP3

R

Expired

1.7

ETP3

G

Expired

2.0

Technical timing provisions

2.1

TTP1

R

Expired

2.2

TTP1

G

Expired

3.0

Timeless (saving) provisions

3.1

TSP1

R

Confirmation of compliance and approval Anex-RPB firm will not contravene any of the provisions labelled TSP1 in COB TP 3.1 to the extent that it is able to demonstrate that, on or aftercommencement, it has carried out the confirmation exercise referred to inCOB 3.6.2 G (2), for an investment advertisementissued or approved beforecommencement, in accordance with thecorresponding ruleof its previous regulator.

Indefinitely

commencement

3.2

TSP2

R

Terms of business and customer agreements

Indefinitely

commencement

(1) Subject to (2) and (3), anex-RPB firmwill not contravene any of the provisions in COB TP 3.1 labelledTSP2to the extent that, on or aftercommencement , it is able to demonstrate that it has continued to use, or rely upon,terms of business (including a client agreement) given to, or made with, a client in accordance with the corresponding rule of its previous regulator.

(2) If the basis on which anex-RPB firmconducts or proposes to conduct itsdesignated investment businessfor a client changes after thecommencement day, it must provide the clientwith amended terms of businessin accordance with COB 4.2.13 R .

(3) Anex-RPB firm must take reasonable steps to ensure that aprivate customerto whom it has providedterms of business (including a client agreement) before commencementis notified in writing of the matters set out in COB 4.2.15E (21) and (22) as soon as practicable after commencement.

3.3

TSP2

G

(1) Firms should note that COB 4.2 also benefits from an ETP1 extra-time provision as set out in COB TR 3.1R. 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 an ex-RPB firm has started, but not concluded, negotiating terms of business with a client before commencement , it may rely on COB TR 3.2(1) R even if the terms of business are not agreed until after commencement.

(3) COB TR 3.2(2)R 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.

3.4

TSP3

R

Know your customer and suitability

Indefinitely

commencement

(1) Subject to (2), anex-RPB firmwill not contravene any of the provisions labelled TSP3 in COB TP 1.3to the extent that it is able to demonstrate that, on or aftercommencement, it has continued to use, or rely upon, a record of a private customer's personal and financial circumstances made in accordance with thecorresponding rules of itsprevious regulator, and in doing so has had regard to the guidance set out inCOB 5.2.6 G.

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

3.5

TSP4

R

Suitability and customers' understanding of risk Anex-RPB firm will not contravene any of the provisions labelled TSP4 in COB TP 1.3to the extent that, on or aftercommencement , it uses, or relies upon, a suitability letter or, as the case may be, a risk warning or disclosure, given to a customerin accordance with the corresponding rule of itsprevious regulator, in relation to a transaction orseries of transactions executedor arrangedprior to commencement.

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 warning also benefit from an ETP1 provision.

Indefinitely

commencement

CHAPTER 3 FINANCIAL PROMOTION (whole chapter)

ETP1

ETP2

3.6 Confirmation of compliance and approval

3.6.1R

Confirmation of compliance

ETP1

TSP1

3.6.2R

Withdrawing confirmation

ETP1

TSP1

3.6.5R

Communicating a financial promotion where another firm has confirmed compliance

ETP1

TSP1

CHAPTER 4 ACCEPTING CUSTOMERS

4.2 Terms of business and customer agreements

ETP1

TSP2

CHAPTER 5 ADVISING AND SELLING

5.2 Know your customer

ETP1

TSP3

5.3 Suitability

ETP1

TSP4

5.4 Customers' understanding of risk

5.4.3R

Requirement for risk warnings

ETP1

TSP4

5.5 Information about the firm

ETP3

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 requirements to dispatch 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 arranged

ETP1

8.1.14R

Record keeping requirements

ETP1

8.2 Periodic statements

8.2.4R

Requirement for a periodic statement

ETP1

TTP1

8.2.9R

Record keeping requirements

ETP1

TTP1

CHAPTER 9 CLIENT ASSETS

9.1 Custody (whole chapter)

ETP1

9.1.35 (3)-(5)R

TSP4

9.1.40R

TSP4

9.1.49R

Client agreement

TSP2

9.1.51R

TSP2

9.1.54R

Risk disclosures

TSP4

9.1.57R

TSP4

9.1.58R

TSP4

9.1.69R

Custodian agreement

TSP2

9.1.74R

Stock lending

TSP21