1. (1)

   1The requirements in this section apply to a firm when dealing in or arranging a deal in a mutual society share with or for a retail client in the EEA where the retail client is to enter into the deal as buyer.

2. (2)

   The requirements in this section do not apply if:

   1. (a)

      the firm has taken reasonable steps to ensure that one (or more) of the exemptions in COBS 22.2.4R applies; or

   2. (b)

      the deal relates to the trading of a mutual society share in the secondary market.

3. (3)

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

1. 1The firm must give the retail client the following risk warning on paper or another durable medium and obtain confirmation in writing from the retail client that he has read it, in good time before the retail client has committed to buy the mutual society share:

2. “The investment to which this communication relates is a share. Direct investment in shares can be high risk and is very different to investment in deposit accounts or other savings products. In particular, you should note that:

   1. (a)

      the entire amount you invest is at risk;

   2. (b)

      income, distribution or dividend payments are not guaranteed, are entirely discretionary, and may be suspended or cancelled at any time, for any reason;

   3. (c)

      the share is a perpetual instrument with no maturity date, and there is no obligation on the issuer to buy the share back;

   4. (d)

      the share may be difficult to sell on for the price you paid for it, or any price; and

   5. (e)

      investing more than 10% of your savings or net investment portfolio in this type of instrument is unlikely to be in your best interests.”

1. (1)

   1The requirements in (2) and (3) must be met if:

   1. (a)

      the firm is not providing an investment service in the course of MiFID or equivalent third country business; and

   2. (b)

      the retail client is not otherwise receiving a personal recommendation4 on the mutual society share from the firm or another person.

2. (2)

   The firm must give the retail client the following statement on paper or another durable medium and obtain confirmation in writing from the retail client that he or she2 has signed it, in good time before the retail client has committed to buy the mutual society share:

3. “I make this statement in connection with proposed investment in mutual society shares. I have been made aware that investing more than 10% of my net assets in mutual society shares is unlikely to be in my best interests. I declare that the proposed investment would not result in more than 10% of my net assets being invested in mutual society shares. Net assets for these purposes mean my financial assets after deduction of any debts I have, and do not include:

   1. (a)

      the property which is my primary residence, any amount owed under a mortgage relating to the purchase of that property, or any money raised through a loan secured on that property;

   2. (b)

      any rights of mine under a qualifying contract of insurance (for example, a life assurance or critical illness policy);2

   3. (c)

      any benefits (in the form of pensions or otherwise) which are payable on the termination of my service or on my death or retirement and to which I am (or my dependants are) or may be entitled; or2

   4. (d)

      any withdrawals from my pension savings (except where the withdrawals are used directly for income in retirement).2

4. I accept that the investment to which this statement relates will expose me to a significant risk of losing all the money invested.

5. Signature:

6. Date: ”

7. (3)

   The firm must assess whether investment in the mutual society share is appropriate for the retail client, complying with the requirements in COBS 10 as though the firm was providing non-advised investment services in the course of MiFID or equivalent third country business.

1. (1)

   1For the purposes of any assessments or certifications required by the exemptions in COBS 22.2.4R, any references in COBS 4.12 provisions to non-mainstream pooled investments must be read as though they are references to mutual society shares.

2. (2)

   If the firm is relying on the exemptions for certified high net worth investors, certified sophisticated investors or self-certified sophisticated investors to comply with this section, the statement the investor must sign should have references to non-mainstream pooled investments replaced with references to mutual society shares.

3. (3)

   The firm must give the retail client a written copy of any risk warning or statement that that individual has been asked to sign for the purposes of compliance with this section.

1A 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 requirements 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 deal;

3. (3)

   the record in (1) must include information and evidence demonstrating compliance with each of the requirements in this section, as applicable;

4. (4)

   if the requirements in COBS 22.2.2R and COBS 22.2.3R did not apply because the firm relied on one of the exemptions, the record in (1) must include which exemption was relied on, together with the reason why the firm is satisfied that that exemption applies;

5. (5)

   where the firm relies on the certified high net worth investor, the certified sophisticated investor or the self-certified sophisticated investor exemption, the record required 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;

6. (6)

   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.

1In this section:

1. (1)

   any requirement that a document is signed may be satisfied by an electronic signature or electronic evidence of assent; and

2. (2)

   any references to writing should be construed in accordance with GEN 2.2.14R and its related guidance provisions.

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.

1This section applies to:

1. (1)

   MiFID investment firms, with the exception of collective portfolio management investment firms; and

2. (2)

   branches of third country investment firms,

in relation to the marketing, distribution or sale of investments specified in articles 85(4A) and 85(4B) of the Regulated Activities Order in or from the United Kingdom to a retail client.

1. (1)

   1A firm must not:

   1. (a)

      sell an investment specified in articles 85(4A) and 85(4B) of the Regulated Activities Order to a retail client; or

   2. (b)

      distribute an investment specified in articles 85(4A) and 85(4B) of the Regulated Activities Order to a retail client; or

   3. (c)

      market an investment specified in articles 85(4A) and 85(4B) of the Regulated Activities Order if the marketing is addressed to or disseminated in such a way that it is likely to be received by a retail client.

2. (2)

   “Marketing” includes, but is not limited to, communicating and/or approving financial promotions.