COBS 4.7 Direct offer financial promotions

16This section (other than COBS 4.7.-1AEU to COBS 4.7.-1DG) does not apply in relation to a communication:

1. (1)

   to the extent that it is an excluded communication;

2. (2)

   to the extent that it is a prospectus advertisement to which article 22 of the Prospectus Regulation applies;

3. (3)

   if it is image advertising;

4. (4)

   to the extent that it relates to a deposit that is not a cash deposit ISA, cash-only lifetime ISA or cash deposit CTF;

5. (5)

   to the extent that it relates to a pure protection contract that is a long-term care insurance contract.

Provisions in this section marked “UK”12 apply in relation to MiFID optional exemption business as if they were rules (see COBS 1.2.2G).

1. (1)

   Subject to (3) and (4), a firm must ensure that a direct offer financial promotion that is addressed to, or disseminated in such a way that it is likely to be received by, a retail client contains:

   1. (a)

      11the information referred to in the rules on information disclosure (COBS 6.1.4 R, COBS 6.1.6 R, COBS 6.1.7 R, COBS 6.1.9 R, COBS 14.3.2 R, COBS 14.3.3 R, COBS 14.3.4 R and COBS 14.3.5 R) as is relevant to that offer or invitation; and11

   2. (b)

      11additional appropriate information about the relevant business and relevant investments so that the client is reasonably able to understand the nature and risks of the relevant business and relevant investments and consequently to take investment decisions on an informed basis.

2. (2)

   This rule does not require the information in (1) to be included in a direct offer financial promotion if, in order to respond to an offer or invitation contained in it, the retail client must refer to another document or documents, which, alone or in combination, contain that information.

3. (3)

   This rule16 does not apply in relation to a marketing11 communication that11 relates to a firm's MiFID, equivalent third country or optional exemption business11

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4. (4)

   [deleted]16

   311311
5. (5)

   [deleted]11

   2

1. (1)

   2A firm must not communicate or approve a direct offer financial promotion:

   1. (a)

      relating to a warrant or derivative;

   2. (b)

      to or for communication to a retail client; and

   3. (c)

      where the firm will not itself be required to comply with the rules on appropriateness (see COBS 10 and 10A11);

   unless the firm has adequate evidence that the condition in (2) is satisfied.

2. (2)

   The condition is that the person who will arrange or deal in relation to the derivative or warrant will comply with the rules on appropriateness or equivalent requirements for any application or order that the person is aware, or ought reasonably to be aware, is in response to the direct offer financial promotion.

1. (1)

   5Unless permitted by COBS 4.7.8 R, a firm must not communicate or approve a direct-offer financial promotion relating to a non-readily realisable security a P2P agreement or a P2P portfolio13 to or for communication to a retail client without the conditions in (2) and (3) being satisfied.

2. (2)

   The first condition is that the retail client recipient of the direct-offer financial promotion is one of the following:

   1. (a)

      certified as a ‘high net worth investor’ in accordance with COBS 4.7.9 R;

   2. (b)

      certified as a ‘sophisticated investor’ in accordance with COBS 4.7.9 R;

   3. (c)

      self-certified as a ‘sophisticated investor’ in accordance with COBS 4.7.9 R; or13

   4. (d)

      certified as a ‘restricted investor’ in accordance with COBS 4.7.10 R.

3. (3)

   The second condition is that the11firm itself or:13

   11
   1. (a)

      the person who will arrange or deal in relation to the non-readily realisable security; or13

   2. (b)

      the person who will facilitate the retail client becoming a lender under a P2P agreement or a P2P portfolio,13

   will comply with the rules on appropriateness (see COBS 10 and COBS 10A) or equivalent requirements for any application or order that the firm or13person is aware, or ought reasonably to be aware, is in response to the direct offer financial promotion.

5A firm may communicate or approve a direct-offer financial promotion relating to a non-readily realisable security, a P2P agreement or a P2P portfolio13 to or for communication to a retail client if:

1. (1)

   the firm itself will comply with the suitability rules (COBS 9 and 9A11) in relation to the investment promoted; or

2. (2)

   the retail client has confirmed before the promotion is made that they are a retail client of another firm that will comply with the suitability rules (COBS 9 and 9A11) in relation to the investment promoted; or

3. (3)

   the retail client is a corporate finance contact or a venture capital contact.

1. (1)

   13A certified high net worth investor, a certified sophisticated investor or a self-certified sophisticated investor is an individual who has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the terms set out in the applicable rule listed below and as modified by (2):13

   1. (a)

      certified high net worth investor: COBS 4.12.6 R;13

   2. (b)

      certified sophisticated investor: COBS 4.12.7 R;13

   3. (c)

      self-certified sophisticated investor: COBS 4.12.8 R.13

2. (2)

   Each of the statements in (1), when used in relation to non-readily realisable securities, P2P agreements or a P2P portfolio, must, as appropriate, be modified as follows:13

   1. (a)

      in all of the statements, any references to “non-mainstream pooled investments” must be replaced with references to “non-readily realisable securities” or “P2P agreements or P2P portfolios”, as applicable; 13

   2. (b)

      in the statement in COBS 4.12.8R, the reference to “unlisted company” must be replaced with a reference to “P2P agreement or P2P portfolio”; and13

   3. (c)

      in the statement in COBS 4.12.8R, the reference to “private equity sector, or in the provision of finance for small and medium enterprises” must be replaced with a reference to “provision of finance, resulting in an understanding of the P2P agreements or P2P portfolios to which the promotions will relate.”13