COBS 10A.4 Assessing appropriateness: when it need not be done

1. (1)

   A firm is not required to ask its client to provide information or assess appropriateness if:

   1. (a)

      the service:

      1. (i)

         only consists of execution or reception and transmission of client orders, with or without ancillary services, excluding ancillary service (2) in section B of Annex I to MiFID (granting of credits or loans), where the relevant credits or loans do not comprise existing credit limits of loans, current accounts and overdraft facilities of clients;

      2. (ii)

         relates to particular financial instruments; and

      3. (iii)

         is provided at the initiative of the client;

   2. (b)

      the client has been clearly informed (whether in a standardised format or not) that, in the provision of this service, the firm is not required to assess the appropriateness of the financial instrument or service provided or offered and that therefore the client does not benefit from the protection of the rules on assessing appropriateness; and

   3. (c)

      the firm complies with its obligations in relation to conflicts of interest.

2. (2)

   The financial instruments referred to in (1)(a)(ii) are any of the following:

   1. (a)

      shares in companies admitted to trading on:

      1. (i)

         a regulated market; or

      2. (ii)

         an equivalent third country market; or

      3. (iii)

         an MTF,

      except shares that embed a derivative and units in a collective investment undertaking that is not a UCITS; or

   2. (b)

      bonds or other forms of securitised debt admitted to trading on:

      1. (i)

         a regulated market; or

      2. (ii)

         an equivalent third country market; or

      3. (iii)

         an MTF,

      except those that embed a derivative or incorporate a structure which makes it difficult for the client to understand the risk involved; or

   3. (c)

      money-market instruments, excluding those that embed a derivative or incorporate a structure which makes it difficult for the client to understand the risk involved; or

   4. (d)

      shares or units in a UCITS, excluding structured UCITS as referred to in the second subparagraph of article 36(1) of the KII Regulation; or

   5. (e)

      structured deposits, excluding those that incorporate a structure which makes it difficult for the client to understand the risk of return or the cost of exiting the product before term; or

   6. (f)

      other non-complex financial instruments.

3. (3)

   For the purposes of this rule, a third country market is considered to be equivalent to a regulated market if it is a market in relation to which the Commission has adopted an affirmative equivalence decision in accordance with the requirements in article 4(1)(c) of Directive 2003/71/EC and the condition in article 4(1)(d) of Directive 2003/71/EC is satisfied.

[Note: article 25(4) of MIFID]

[Note:

ESMA has published guidelines which specify criteria for the assessment of (i) debt instruments incorporating a structure which makes it difficult for the client to understand the risk involved, and (ii) structured deposits incorporating a structure which makes it difficult for the client to understand the risk of return or the cost of exiting the product before term. The guidelines can be found here: [https://www.esma.europa.eu/sites/default/files/library/2015-1787_-_guidelines_on_complex_debt_instruments_and_structured_deposits.pdf].]