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COBS 4.1 Application

Who? What?

COBS 4.1.1RRP

1This chapter applies to a firm:

  1. (1)

    communicating with a client in relation to its designated investment business;

  2. (2)

    communicating or approving a financial promotion other than:

    1. (a)

      a financial promotion of qualifying credit, a home purchase plan or a home reversion plan; or

    2. (b)

      a financial promotion in respect of a non-investment insurance contract; or

    3. (c)

      a promotion of an unregulated collective investment scheme that would breach section 238(1) of the Act if made by an authorised person (firms may not communicate or approve such promotions).

COBS 4.1.2GRP

This chapter applies in relation to an authorised professional firm in accordance with COBS 18 (Specialist regimes).

COBS 4.1.3GRP

A firm is required to comply with the financial promotion rules in relation to a financial promotion communicated by its appointed representative even where the financial promotion does not require approval because of the exemption in article 16 of the Financial Promotion Order (Exempt persons).

[Note: see section 39 of the Act]

COBS 4.1.4GRP
  1. (1)

    In COBS 4.3.1 R, COBS 4.5.8 R and COBS 4.7.1 R, the defined terms "financial promotion" and "direct offer financial promotion" include, in relation to MiFID or equivalent third country business, all communications that are marketing communications within the meaning of MiFID.

  2. (2)

    In the case of MiFID or equivalent third country business, certain requirements in this chapter are subject to an exemption for the communication of a third party prospectus in certain circumstances. This has a similar effect to the exemption in article 70(1)(c) of the Financial Promotion Order, which is referred to in the definition of an excluded communication.

COBS 4.1.5GRP

  1. (1)

    A firm communicating with an eligible counterparty 2 should have regard to the application of COBS to eligible counterparty business (COBS 1 Annex 1 Part 1).

  2. (2)

    This chapter does not apply in relation to communicating with an eligible counterparty other than the section on compensation information (see COBS 4.4) 2but elements of the requirements in PRIN may apply.

COBS 4.1.6GRP

Approving a financial promotion without communicating it is not MiFID or equivalent third country business. Communicating a financial promotion to a person other than a 2client or a potential client2 is also not MiFID or equivalent third country business. Further guidance on what amounts to MiFID business may be found in PERG 13.

COBS 4.1.7GRP

A reference in this chapter to MiFID or equivalent third country business includes a reference to communications that occur before an agreement to perform services in relation to MiFID or equivalent third country business.

[Note: see recital 82 to the MiFID implementing Directive]

Where? General position

COBS 4.1.8RRP

  1. (1)

    In relation to communications by a firm to a client in relation to its designated investment business this chapter applies in accordance with the general application rule and the rule on business with UK clients from an overseas establishment (COBS 1 Annex 1 Part 2 paragraph 2.1R).

  2. (2)

    In addition, the financial promotion rules apply to a firm in relation to:

    1. (a)

      the communication of a financial promotion to a person inside the United Kingdom;

    2. (b)

      the communication of a cold call to a person outside the United Kingdom, unless:

      1. (i)

        it is made from a place outside the United Kingdom; and

      2. (ii)

        it is made for the purposes of a business which is carried on outside the United Kingdom and which is not carried on in the United Kingdom; and

    3. (c)

      the approval of a financial promotion for communication to a person inside the United Kingdom.

Where? Modifications to comply with EU law

COBS 4.1.9GRP

  1. (1)

    The EEA territorial scope rule modifies the general territorial scope of the rules in this chapter to the extent necessary to be compatible with European law. This means that in a number of cases, the rules in this chapter will apply to communications made by UK firms to persons located outside the United Kingdom and will not apply to communications made to persons inside the United Kingdom by EEA firms. Further guidance on this is located in COBS 1 Annex 1.

  2. (2)

    One effect of the EEA territorial scope rule is that the rules in this chapter will not generally apply to a simplified prospectus that relates to a simplified prospectus scheme from another EEA State.

  3. (3)

    The financial promotion rules do not apply to incoming communications in relation to the MiFID business of an investment firm from another EEA State that are, in its home member state, regulated under MiFID in another EEA State. For the purpose of article 36 of the Financial Promotion Order the FSA does not make any rules in relation to such incoming communications.

COBS 4.1.10GRP

Firms should note the territorial scope of this chapter is also affected by:

  1. (1)

    the disapplication for financial promotions originating outside the United Kingdom that are not capable of having an effect within the United Kingdom (section 21(3) of the Act (Restrictions on financial promotion)) (see the defined term “excluded communication”);

  2. (2)

    the exemptions for overseas communicators (see the defined term “excluded communication”); and

  3. (3)

    the rules on financial promotions with an overseas element (see COBS 4.9).