COBS 14.3 Information about designated investments (non-MiFID provisions)

This section applies to a firm in relation to:

1. (1)

   [deleted]8

2. (2)

   any of8 the following regulated activities when carried on for a retail client:

   1. (a)

      making a personal recommendation about a designated investment6;5 or

   2. (b)

      managing investments that are designated investments (other than a P2P agreement);5 or

   3. (c)

      arranging (bringing about) or executing a deal in a warrant, non-readily realisable security4speculative illiquid security,12 or derivative; or

   4. (d)

      engaging in stock lending activity; or4

      4
   5. (e)

      operating an electronic system in relation to lending, but only in relation to facilitating a person becoming a lender under a P2P agreement.4

   8except to the extent that the carrying on of such a regulated activity constitutes MiFID, equivalent third country or optional exemption business.

3. (3)

   12Where a rule in this chapter applies to a firm which is arranging (bringing about) or executing a deal in a speculative illiquid security, the rule also applies to:

   1. (a)

      a TP firm (to the extent that the rule does not already apply to such a TP firm as a result of GEN 2.2.26R); and

   2. (b)

      a Gibraltar-based firm (having the same meaning as in the Gibraltar Order) to the extent that the rule does not already apply to such a Gibraltar-based firm as a result of GEN 2.3.1R).

A firm must provide a client with a general description of the nature and risks of designated investments, taking into account, in particular, the client's categorisation as a retail client or a professional client. That description must:

1. (1)

   explain the nature of the specific type of designated investment concerned, as well as the risks particular to that specific type of designated investment, in sufficient detail to enable the client to take investment decisions on an informed basis; and

2. (2)

   include, where relevant to the specific type of designated investment concerned and the status and level of knowledge of the client, the following elements:

   1. (a)

      the risks associated with that type of designated investment including an explanation of leverage and its effects and the risk of losing the entire investment;

   2. (b)

      the volatility of the price of designated investments and any limitations on the available market for such investments;

   3. (c)

      the fact that an investor might assume, as a result of transactions in such designated investments, financial commitments and other additional obligations, including contingent liabilities, additional to the cost of acquiring the designated investments; and

   4. (d)

      any margin requirements or similar obligations, applicable to designated investments of that type.

If a firm provides a retail client with information about a designated investment that is the subject of a current offer to the public and a prospectus has been published in connection with that offer in accordance with the Prospectus Regulation, that firm must inform the retail client where that prospectus is made available to the public.11

Where the risks associated with a designated investment composed of two or more different designated investments or services are likely to be greater than the risks associated with any of the components, a firm must provide an adequate description of the components of that designated investment and the way in which its interaction increases the risks.

In the case of a designated investment that incorporates a guarantee by a third party, the information about the guarantee must include sufficient detail about the guarantor and the guarantee to enable the retail client to make a fair assessment of the guarantee.

The documents and information provided in accordance with the rules in this section must be in a durable medium or available on a website (where that does not constitute a durable medium) that meets2 the website conditions.

1. (1)

   The information to be provided in accordance with the rules in this section must be provided in good time before a firm carries on designated investment business8 with or for a retail client.

2. (2)

   A firm may provide that information immediately after it begins to carry on that business if:

   1. (a)

      the firm was unable to comply with (1) because, at the request of the client, the agreement was concluded using a means of distance communication which prevented the firm from complying with that rule; and

   2. (b)

      in any case where the rule on voice telephony communications (COBS 5.1.12 R) does not otherwise apply, the firm complies with that rule as if the client was a consumer.

A firm must notify a client in good time about any material change to the information provided under the rules in this section which is relevant to a service that the firm is providing to that client. That notification must be given in a durable medium if the information to which it relates is given in a durable medium.

If a firm provides a client with a key investor information document or EEA key investor information document3 that meets all of9 the requirements applying in relation to that document9, it will have provided appropriate information for the purpose of the requirement to disclose information on:

1. (1)

   designated investments and investment strategies (COBS 2.2.1R (1)(b)); and

2. (2)

   costs and associated charges (COBS 2.2.1R (1)(d) and COBS 6.1.9 R1;

in relation to the costs and associated charges in respect of the UCITS scheme itself, including the exit and entry commissions.

7If a firm provides a client with a NURS-KII document it will have provided appropriate information for the requirement to disclose information on:

1. (1)

   designated investments and investment strategies (COBS 2.2.1R(1)(b)); and

2. (2)

   costs and associated charges (COBS 2.2.1R(1)(d) and COBS 6.1.9R);

in relation to the costs and associated charges for the KII-compliant NURS itself, including the exit and entry commissions.