COBS 11.7 Personal account dealing

A firm that conducts designated investment business must establish, implement and maintain adequate arrangements aimed at preventing the following activities in the case of any relevant person who is involved in activities that may give rise to a conflict of interest, or who has access to inside information as defined in the Market Abuse Regulation3 or to other confidential information relating to clients or transactions with or for clients by virtue of an activity carried out by him on behalf of the firm:

1. (1)

   entering into a personal transaction which meets at least one of the following criteria:

   1. (a)

      that person is prohibited from entering into it under the Market Abuse Regulation3;

   2. (b)

      it involves the misuse or improper disclosure of that confidential information;

   3. (c)

      it conflicts or is likely to conflict with an obligation of the firm to a customer under the regulatory system or any other obligation of the firm under MiFID or the UCITS Directive;2

2. (2)

   advising or procuring, other than in the proper course of his employment or contract for services, any other person to enter into a transaction in designated investments which, if a personal transaction of the relevant person, would be covered by (1) or a relevant provision;

3. (3)

   disclosing, other than in the normal course of his employment or contract for services, any information or opinion to any other person if the relevant person knows, or reasonably ought to know, that as a result of that disclosure that other person will or would be likely to take either of the following steps:

   1. (a)

      to enter into a transaction in designated investments which, if a personal transaction of the relevant person, would be covered by (1) or a relevant provision;

   2. (b)

      to advise or procure another person to enter into such a transaction.

For the purposes of this section, the relevant provisions are:

1. (1)

   the rules on personal transactions undertaken by financial analysts in COBS 12.2.5 R (1) and (2);

2. (2)

   the rule on the misuse of information relating to pending client orders in COBS 11.3.5 R.

The arrangements required under this section must in particular be designed to ensure that:

1. (1)

   each relevant person covered by this section is aware of the restrictions on personal transactions, and of the measures established by the firm in connection with personal transactions and disclosure, in accordance with this section;

2. (2)

   the firm:

   1. (a)

      is informed promptly of any personal transaction entered into by a relevant person, either by notification of that transaction or by other procedures enabling the firm to identify such transactions; or

   2. (b)

      in the case of outsourcing arrangements, ensures that the service provider to which the activity is outsourced maintains a record of personal transactions entered into by any relevant person and provides that information to the firm promptly on request;

3. (3)

   a record is kept of the personal transaction notified to the firm or identified by it, including any authorisation or prohibition in connection with such a transaction.

This section does not apply to the following kinds of personal transaction:

1. (1)

   personal transactions effected under a discretionary portfolio management service where there is no prior communication in connection with the transaction between the portfolio manager and the relevant person or other person for whose account the transaction is executed;

2. (2)

   personal transactions in units or shares in collective undertakings that comply with the conditions necessary to enjoy the rights conferred by the UCITS Directive or are subject to supervision under the law of an EEA State which requires an equivalent level of risk spreading in their assets, where the relevant person and any other person for whose account the transactions are effected, are not involved in the management of that undertaking;

3. (3)

   personal transactions in life policies.

For the purposes of this section, a person who is not:

1. (1)

   a director, partner or equivalent, manager or appointed representative (or, where applicable, a tied agent) of the firm; or

2. (2)

   a director, partner or equivalent, or manager of any appointed representative (or where applicable, a tied agent) of the firm;

will only be a relevant person to the extent that they are involved in the provision of designated investment business or collective portfolio management services.2

Where successive personal transactions are carried out on behalf of a person in accordance with prior instructions given by that person, the obligations under this section do not apply:

1. (1)

   separately to each successive transaction if those instructions remain in force and unchanged; or

2. (2)

   to the termination or withdrawal of such instructions, provided that any financial instruments which had previously been acquired pursuant to the instructions are not disposed of at the same time as the instructions terminate or are withdrawn.

Obligations under this section do apply in relation to a personal transaction, or the commencement of successive personal transactions, that are carried out on behalf of the same person if those instructions are changed or if new instructions are issued.