COBS 22.3 Restrictions on the retail distribution of contingent convertible instruments and CoCo funds

1. (1)

   1The restrictions in this section apply in relation to the following investments:

   1. (a)

      a contingent convertible instrument; or

   2. (b)

      a security issued by a CoCo fund; or

   3. (c)

      a beneficial interest in either of (a) or (b).

2. (2)

   A firm must not:

   1. (a)

      sell an investment to a retail client in the EEA; or

   2. (b)

      communicate or approve an invitation or inducement to participate in, acquire or underwrite an investment where that invitation or inducement is addressed to or disseminated in such a way that it is likely to be received by a retail client in the EEA.

3. (3)

   The restrictions do not apply if the firm has taken reasonable steps to ensure that one (or more) of the exemptions in COBS 22.3.2R applies.

4. (4)

   In this section a retail client includes a person who would be a retail client if he were receiving services from the firm in the course of the firm carrying on a regulated activity.

1. (1)

   For the purposes of any assessments or certifications required by the exemptions in COBS 22.3.2R, any references in COBS 4.12 provisions to non-mainstream pooled investments must be read as though they are references to contingent convertible instruments or CoCo funds, as relevant.

2. (2)

   If the firm is relying on the high net worth investor, the sophisticated investor or the self-certified sophisticated investor exemption to comply with this section, the statement the investor must sign should have references to non-mainstream pooled investments replaced with references to contingent convertible instruments or CoCo funds, as relevant.

3. (3)

   The firm must give the retail client a written copy of any statements that individual has been asked to sign as part of certification as a high net worth, sophisticated or self-certified sophisticated investor for the purposes of compliance with this section.

A firm which carries on an activity which is subject to this section must comply with the following record-keeping requirements:

1. (1)

   the person allocated the compliance oversight function in the firm must make a record at or near the time of the activity certifying it complies with the restrictions set out in this section;

2. (2)

   the making of the record required in (1) may be delegated to one or more employees of the firm who report to, and are supervised by, the person allocated the compliance oversight function, provided the process for certification of compliance has been reviewed and approved by the person allocated the compliance oversight function no more than 12 months before the date of the sale or communication or approval of the invitation or inducement;

3. (3)

   when making the record required in (1), the firm must make a record of which exemption was relied on for the purposes of the activity within the scope of this section, together with the reason why the firm is satisfied that that exemption applies;

4. (4)

   where the firm relies on the certified high net worth investor, the certified sophisticated investor or the self-certified sophisticated investor exemption, the record in (1) must include a copy of the certificate or investor statement (as signed by the investor) and of the warnings or indications required by the exemption, as applicable;

5. (5)

   a firm must retain the record required in (1) for five years if it relates to MiFID or equivalent third country business, and otherwise for three years.