COBS 1 Annex 1 Application (see COBS 1.1.2R)

1.

Eligible counterparty business

1.1

10

R

The COBS provisions shown below do not apply to eligible counterparty business except, where the eligible counterparty business is in scope of the IDD, those provisions which implemented16 the IDD continue to apply15.2

COBS provision

Description

COBS 2 (other than COBS 2.1.1AR, COBS 2.2A and12COBS 2.4)

Conduct of business obligations

COBS 4 (other than COBS 4.2,12COBS 4.4.1 R, COBS 4.5A.9UK and COBS 4.7.-1AUK16)

Communicating with clients including financial promotions

COBS 6.1

Information about the firm, its services and remuneration (non-MiFID and non insurance distribution15 provisions)12

12 COBS 6.1ZA.16R 13

12Information about costs and charges of different services or products (MiFID provisions)

12 COBS 6.1ZA.22R 13

12Compensation information (MiFID provisions)

COBS 8

Client agreements (non-MiFID provisions)12

12 COBS 8A (other than COBS 8A.1.5UK16 to COBS 8A.1.8G)

12Client agreements (MiFID provisions)

COBS 10

Appropriateness (for non-MiFID12 and non-insurance-based investment products15 non-advised services) (non-MiFID and non-insurance-based investment products provisions)15

12 COBS 10A

12Appropriateness (for non-advised services) (MiFID and insurance-based investment products15 provisions)

COBS 11.2A 12, COBS 11.2B and12COBS 11.3

Best execution, quality of execution and12 client order handling12

COBS 12.2.18UK 16

Labelling of non-independent research

COBS 14.3

Information about designated investments (non-MiFID provisions)12

COBS 16

Reporting information to clients (non-MiFID provisions)12

[Note: paragraphs 1 and 2 of article 30(1)12 of MiFID]

2.

Transactions between an MTF operator and its users

2.1

10

R

The COBS provisions (applicable to MiFID business) shown below12 do not apply to a transaction between an operator of an MTF and a member or participant in relation to the use of the MTF.

12 COBS provision

12 Description

12 COBS 2 (other than COBS 2.4)

12Conduct of business obligations

12 COBS 4 (other than COBS 4.4.1R)

12Communicating with clients, including financial promotions

12 COBS 6.1ZA

12Information about the firm and compensation information (MiFID provisions)

12 COBS 8A

12Client agreements (MiFID provisions)

12 COBS 10A

12Appropriateness (for non-advised services) (MiFID provisions)

12 COBS 11.2A , COBS 11.2B, COBS 11.3 and COBS 11.4

12Best execution, quality of execution, client order handling and client limit orders

12 COBS 14.3A

12Information about financial instruments (MiFID provisions)

12 COBS 16A

12Reporting information to clients (MiFID provisions)

[Note: article 19(4)12 of MiFID]

3.

Transactions concluded on an MTF

3.1

10

R

The COBS provisions in paragraph 2.1R12 do not apply to transactions concluded under the rules governing an MTF between members or participants of the MTF2. However, the member or participant must comply with those provisions in respect of its clients if, acting on its clients behalf, it is executing their orders on an MTF.

[Note: article 19(4)12 of MiFID]

12 3A.

12 Operators of OTFs

123A.1

12G

12A firm which operates an organised trading facility should refer to MAR 5A.3.9R which specifies how the provisions in this sourcebook apply to that activity.

4.

Transactions concluded on a regulated market

4.1

10

R

In relation to transactions concluded on a regulated market2, members and participants of the regulated market are not required to apply to each other the COBS provisions in paragraph 2.1R12. However, the member or participant must comply with those provisions in respect of its clients if, acting on its clients behalf, it is executing their orders on a regulated market.

[Note: article 53(4)12 of MiFID]

5.

Consumer credit products

5.1

10

R

If a firm, in relation to its MiFID business, offers an investment service as part of a financial product that is subject to other provisions of EU-derived16 law12 related to credit institutions and consumer credits with respect to12 information requirements, that service is not subject to the rules in this sourcebook that implemented16 articles 24(3), (4) and (5)12 of MiFID.

[Note: article 24(6)12 of MiFID]

5.2

10

G

This exclusion for consumer credit products is intended to apply on a narrow basis in relation to cases in which the investment service is a part of another financial product. It does not apply where the investment service is the essential or leading part of the financial product. It also does not apply where the service provided is a combination of an investment service and an ancillary service (for example, granting a credit for the execution of an order where the credit is instrumental to the buying or the selling of a financial instrument.) The exclusion also does not apply in relation to the sale of a financial instrument for the purpose of enabling a client to invest money to repay his obligations under a loan, mortgage or home reversion1.

12 5A.

Mortgages and mortgage bonds

125A.1

12R

12The rule in paragraph 5A.2R applies in relation to an MCD credit agreement with a consumer which is subject to the provisions concerning the creditworthiness assessment of consumers in Chapter 6 of the MCD (which were16 transposed in MCOB 11 and MCOB 11A).

125A.2

12R

12If an agreement with a consumer within paragraph 5A.1R has as a pre-requisite the provision to that same consumer of an investment service in relation to mortgage bonds satisfying the conditions in paragraph 5A.3R in order for the loan to be payable, refinanced or redeemed, that investment service is not subject to the rules in this sourcebook which implemented16 article 25 of MiFID.

125A.3

12R

12The conditions in paragraph 5A.2R are that the mortgage bonds:

12(1)

12are specifically issued to secure the financing of the MCD credit agreement in paragraph 5A.1R; and

12(2)

12have terms which are identical to the MCD credit agreement in paragraph 5A.1R.

[Note: article 25(7) of MiFID]

6. 10

Use of third party processors in life insurance distribution 15 activities

6.12

10

R

If a firm (or its appointed representative or, where applicable, its tied agent) outsources insurance distribution activities15 to a third party processor:

2

(1)

the firm must accept responsibility for the acts and omissions of that third party processor conducting those outsourced activities; and

2

(2)

any COBSrule requiring the third party processor's identity to be disclosed to clients must be applied as a requirement to disclose the firm's identity;

2

unless the third party processor is giving personal recommendations in relation to advising on investments (except P2P agreements)14.

7. 10

Modified meaning of regulated activities for UK AIFMs and UK UCITS management companies 7

7.17

10

R

In determining whether a provision in COBS applies to a UK AIFM or a UK UCITS management company, an activity carried on by the firm which would be a regulated activity but for article 72AA (Managers of UCITS and AIFs) of the Regulated Activities Order, must be treated as a regulated activity carried on by the firm.7

11 8.

PRIIPs Regulation [deleted]16

16

1.

EEA territorial scope rule: compatibility with European law [deleted]16

16

10

2.

Business with UK clients from overseas establishments

2.1

10

R

(1)

This sourcebook applies to a firm which carries on business with a client in the United Kingdom from an establishment overseas.

(2)

But the sourcebook does not apply to those activities if the office from which the activity is carried on were a separate person and the activity:

(a)

would fall within the overseas persons exclusions in article 72 of the Regulated Activities Order; or

(b)

would not be regarded as carried on in the United Kingdom.

2.2

10

G

[deleted]16

1.

The main extensions, modifications and restrictions to the general application

1.1

10

G

The general application of this sourcebook12 is modified in Parts 1 and 2 2of Annex 1 and in certain chapters of the Handbook. The modification may be an extension of the general application12. For example, COBS 4 (Communicating with clients, including financial promotions) has3 extended the general12 application12.

1.2

10

G

[deleted]16

121.3

12G

Certain16 chapters of this sourcebook apply only to firms in relation to their MiFID, equivalent third country or optional exemption business and, in some of these chapters, specified insurance distribution activities (sometimes only in relation to insurance-based investment products)15 while others apply only to firms’ designated investment business which is not MiFID, equivalent third country or optional exemption business or, in some of these chapters, certain insurance distribution activities15.

121.4

12G

12 COBS 18 (Specialist regimes) contains specialist regimes which modify the application of the provisions in this sourcebook for particular types of firm and business. To the extent that they are in conflict, the rules in COBS 18 on the application of the provisions in this sourcebook should be understood as overriding any other provision (whether in COBS 1 or an individual chapter) on the application of COBS. 16

2.

The Single Market Directives and other directives [deleted]16

3.

MiFID: effect on territorial scope [deleted]16

16

4.

Insurance Distribution Directive 15 : effect on territorial scope [deleted]16

16

5.

Solvency II Directive: effect on territorial scope 9 [deleted]16

16

6.

Distance Marketing Directive: effect on territorial scope [deleted]16

16

7.

Electronic Commerce Directive: effect on territorial scope [deleted]16

16

8.

Investor Compensation Directive [deleted]16

16

9.

UCITS Directive: effect on territorial scope [deleted]16

16

7 10.

10

AIFMD: effect on territorial scope [deleted]16

16

17 11.

SRD: effect on territorial scope [deleted] 18