1This chapter applies to a firm:

1. (1)

   communicating with a client in relation to its designated investment business (other than MiFID, equivalent third country or optional exemption business)10;

2. (1A)

   10communicating with a client in relation to its MiFID, equivalent third country or optional exemption business;

3. (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); or8

      8
   4. (d)

      a financial promotion in relation to a credit agreement, a consumer hire agreement or a credit-related regulated activity.8

4. (3)

   9when a MiFID investment firm or a credit institution is communicating in connection with selling, or advising clients in relation to, structured deposits as specified by COBS 1.1.1AAR.

6 COBS 4.4.3R applies to a firm with respect to the activity of issuing electronic money.

13The rules in this chapter do not apply in relation to the form or content of a key investor information document, an EEA key investor information document or a NURS-KII document.

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 UKclients 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.

1. (1)

   A firm must ensure that a communication or a financial promotion is fair, clear and not misleading.

2. (2)

   This rule applies in relation to:

   1. (a)

      a communication by the firm to a customer6 in relation to designated investment business which is not MiFID, equivalent third country or optional exemption business,7 other than a third party prospectus;

   2. (aa)

      6a communication to an eligible counterparty that is in relation to:8

      1. (i)

         MiFID or equivalent third country business other than a third party prospectus; or8

      2. (ii)

         insurance distribution;8

   3. (ab)

      7a communication by the firm to a customer in relation to MiFID, equivalent third country or optional exemption business, other than a third party prospectus;

   4. (b)

      a financial promotioncommunicated by the firm that is not:

      1. (i)

         an excluded communication;

      2. (ii)

         a non-retail communication;

      3. (iii)

         a third party prospectus; and

   5. (c)

      a financial promotion approved by the firm.

3. (3)

   6As part of complying with (1), a firm must take into account the nature of the client.

1If, in relation to a particular communication or financial promotion, a firm takes reasonable steps to ensure it complies with the fair, clear and not misleading rule, a contravention of that rule does not give rise to a right of action under section 138D of the Act.

1. (1)

   A firm must ensure that a financial promotion addressed to a client is clearly identifiable as such.

   [Note: article 24(3)4 of MiFID, article 17(2) of the IDD5 and article 77 of the UCITS Directive]3

2. (2)

   If2 a financial promotion relates to a2firm'sMiFID, equivalent third country or optional exemption business4, this rule does not apply to the extent that the2financial promotion is a third party prospectus.

   2
3. (3)

   If2 a financial promotion relates2 to a 2 firm's business that is not 2MiFID or equivalent third country business, this rule applies to communicating or approving the2financial promotion but does not apply:

   1. (a)

      to the extent that it is an excluded communication;

   2. (b)

      to the extent that it is a prospectus advertisement to which article 22 of the Prospectus Regulation7 applies;

   3. (c)

      if it is image advertising;

   4. (d)

      if it is a non-retail communication;

   5. (e)

      [deleted]5

      1
4. (4)

   In the case of a marketing communication that relates to:5

   1. (a)

      a UCITS scheme6, or

      5
   2. (b)

      insurance distribution,5

   (2) and (3) do not limit the application of this rule.3

A firm must ensure that any reference in advertising to an investor compensation scheme 3 is limited to a factual reference to the scheme.

2To ensure that a firm pays due regard to the information needs of its clients, and communicates information to them in a way which is clear, fair and not misleading with respect to the activity of issuing electronic money, a firm must ensure that, in good time before the firm issues electronic money to a person, it has been communicated to that person on paper or in another durable medium that the compensation scheme does not cover claims made in connection with issuing electronic money.

1. (1)

   Subject to (2) and (3), this section applies to a firm in relation to:

   1. (a)

      the provision of information in relation to its designated investment business; and

   2. (b)

      the communication or approval of a financial promotion;

   where such information or financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail client.

2. (2)

   This section does not apply to a firm communicating in relation to its MiFID, equivalent third country or optional exemption business.6

   333
3. (3)

   This6 section does not apply in relation to a communication6:

   333
   1. (a)

      to the extent that it is an excluded communication;

   2. (b)

      to the extent that it is a prospectus advertisement to which article 22 of the Prospectus Regulation9 applies;

   3. (c)

      if it is image advertising.

A firm must ensure that information:

1. (1)

   includes the name of the firm;

2. (2)

   is accurate and always gives a fair and prominent indication of any relevant risks when referencing6 any potential benefits of relevant business or a relevant investment6;

3. (3)

   is sufficient for, and presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received;6

4. (4)

   does not disguise, diminish or obscure important items, statements or warnings.

5. (5)

   6uses a font size in the indication of relevant risks that is at least equal to the predominant font size used throughout the information provided, as well as a layout that ensures that such indication is prominent;

6. (6)

   6is consistently presented in the same language throughout all forms of information and marketing materials that are provided to each client, unless the client has agreed to receive information in more than one language; and

7. (7)

   6is up-to-date and relevant to the means of communication used.

6If information compares relevant business, relevant investments, or persons who carry on relevant business, a firm must ensure that the comparison is meaningful and presented in a fair and balanced way

1. (1)

   If any information refers to a particular tax treatment, a firm must ensure that it prominently states that the tax treatment depends on the individual circumstances of each client and may be subject to change in future.6

2. (2)

   This rule applies in relation to a financial promotion except6 to the extent that it relates to66a pure protection contract that is a long-term care insurance contract6.

1. (1)

   A firm must ensure that information contained in a financial promotion is consistent with any information the firm provides to a retail client in the course of carrying on designated investment business6.6

2. (2)

   This rule does not apply to a financial promotion to the extent that it relates 6a pure protection contract that is a long-term care insurance contract.

11The rules in COBS 4.5.12R to COBS 4.5.15R apply to:

1. (1)

   a financial promotion relating to an authorised fund;

2. (2)

   a communication which contains a statement referring to or concerning the past performance of an authorised fund; and

3. (3)

   any other communication about an authorised fund that refers in any way to the aims of the fund or describes the benefits or risks of investing in it.

8Subject to COBS 4.5.13R, an authorised fund manager must include in any communication about an authorised fund to which this rule11 applies:

1. (1)

   a short explanation, in terms consistent with the relevant prospectus, of the choice and use of every target benchmark, constraining benchmark or comparator benchmark used in relation to the scheme; or

2. (2)

   where no target benchmark, constraining benchmark or comparator benchmark is referred to in the prospectus, a statement to that effect and a short explanation of how investors can assess the performance of the scheme.

8Where an authorised fund manager includes, in any communication about an authorised fund to which this rule11 applies, an indication of past performance for any authorised fund it manages, it must (in addition to complying with COBS 4.6.2R where applicable):

1. (1)

   include the corresponding past performance record of any target benchmark or constraining benchmark referred to in the prospectus of the scheme; and

2. (2)

   not include an indication of past performance for any index, indices or similar factor that is not referred to in the prospectus of the scheme.

1. (1)

   8Subject to paragraph (2), if a communication to which COBS 4.5.13R applies includes information comparing past performance of the scheme against one or more comparator benchmarks, the authorised fund manager must, for the period specified in paragraph (3) and in every subsequent communication it makes that is also subject to COBS 4.5.13R:

   1. (a)

      include a comparison against the same comparator benchmark or comparator benchmarks; and

   2. (b)

      not include a comparison against any other benchmark.

2. (2)

   Paragraph (1) does not apply if such a comparison would not be compliant with COBS 4.5.13R as a result of a change to the prospectus of the scheme.

3. (3)

   The period specified for the purposes of paragraph (1) is:

   1. (a)

      twelve months after a one-off communication is made; or

   2. (b)

      for as long as the communication remains available to the public in a durable medium and has not been superseded by a revised version.

8 COBS 4.5.12R to COBS 4.5.14R do not apply in respect of any reference to a comparator benchmark that is not identified in the prospectus of the relevant scheme when that reference appears in a communication that is:

1. (1)

   used exclusively in the course of a personal visit, telephone conversation or other interactive dialogue; or

2. (2)

   in response to a specific unsolicited request by a client for past performance to be compared with a particular comparator benchmark.

1. (1)

   10This rule applies to any financial promotion relating to a FIIA except the FIIA’sprospectus.

2. (2)

   A firm must ensure that the following risk warning is given:

   1. “[Name of fund] invests in assets that may at times be hard to sell. This means that there may be occasions when you experience a delay or receive less than you might otherwise expect when selling your investment. For more information on risks, see the prospectus and key investor information document.”

3. (3)

   If the financial promotion is a non-real time financial promotion, a firm must ensure that the risk warning is prominently placed in the financial promotion in a font size that is at least equal to the predominant font size used throughout the communication.

1. (1)

   1This section applies to a firm in relation to:

   1. (a)

      the provision of information; or

   2. (b)

      the communication of a financial promotion,

   which relates to the firm’sMiFID, equivalent third country or optional exemption business.

2. (2)

   This section does not apply to a communication:

   1. (a)

      to the extent that it is a third party prospectus; or

   2. (b)

      if it is image advertising.

[Note: article 24(3) of MiFID]

Provisions in this section marked “UK”2 apply in relation to MiFID optional exemption business as if they were rules (see COBS 1.2.2G).

1. (1)

   3This rule applies to any financial promotion relating to a FIIA that is addressed to, or disseminated in such a way that it is likely to be received by, a retail client, except the FIIA’sprospectus.

2. (2)

   A firm must ensure that the following risk warning is given:

   1. “[Name of fund] invests in assets that may at times be hard to sell. This means that there may be occasions when you experience a delay or receive less than you might otherwise expect when selling your investment. For more information on risks, see the prospectus and key investor information document.”

3. (3)

   If the financial promotion is a non-real time financial promotion, the risk warning must be prominently placed in the financial promotion in a font size that is at least equal to the predominant font size used throughout the communication.

1. (1)

   Subject to (2) and (3), this section applies to a firm in relation to:1

   1. (a)

      [deleted]6

      1222
   2. (b)

      the communication or approval of a financial promotion,6

      1

where such information or financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a retail client.1

1. (2)

   This section does not apply to a firm communicating in relation to its MiFID, equivalent third country or optional exemption business6

   33
2. (3)

   This6 section does not apply in relation to a communication6:

   3333
   1. (a)

      to the extent that it is an excluded communication;

   2. (b)

      to the extent that it is a prospectus advertisement to which article 22 of the Prospectus Regulation8 applies;

   3. (c)

      if it is image advertising;

   4. (d)

      to the extent that it relates to a deposit that is not a structured deposit (see also COBS 4.1.1R(3))6;

   5. (e)

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

A firm must ensure that information that contains an indication of past performance of relevant business, a relevant investment or a financial index, satisfies the following conditions:

1. (1)

   that indication is not the most prominent feature of the communication;

2. (2)

   the information includes appropriate performance information which covers the6 preceding five years, or the whole period for which the investment has been offered, the financial index has been established, or the service has been provided (where6 less than five years, or such longer period as the firm may decide)6, and in every case that performance information must be based on6 complete 12-month periods;

3. (3)

   the reference period and the source of information are clearly stated;

4. (4)

   the information contains a prominent warning that the figures refer to the past and that past performance is not a reliable indicator of future results;

5. (5)

   if the indication relies on figures denominated in a currency other than pounds sterling7, the currency is clearly stated, together with a warning that the return may increase or decrease as a result of currency fluctuations;

6. (6)

   if the indication is based on gross performance, the effect of commissions, fees or other charges is disclosed.

A firm must ensure that information that contains an indication of simulated past performance of relevant business, a relevant investment or a financial index, satisfies the following conditions:

1. (1)

   it relates to an investment or a financial index;

2. (2)

   the simulated past performance is based on the actual past performance of one or more investments or financial indices which are the same as, substantially the same as,6 or underlie, the investment concerned;

3. (3)

   in respect of the actual past performance referred to in (2)6, the conditions set out in paragraphs (1) to (3), (5) and (6) of the rule on past performance (COBS 4.6.2 R) are complied with; and

4. (4)

   the information contains a prominent warning that the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance.

1. (1)

   A firm must ensure that information that contains an indication of future performance of relevant business, a relevant investment, a structured deposit or a financial index, satisfies the following conditions:

   1. (a)

      it is not based on and does not refer to simulated past performance;

   2. (b)

      it is based on reasonable assumptions supported by objective data;

   3. (c)

      where6 the indication is based on gross performance, the effect of commissions, fees or other charges is disclosed6;

   4. (ca)

      6it is based on performance scenarios in different market conditions (both negative and positive scenarios), and reflects the nature and risks of the specified types of investments included in the analysis; and

   5. (d)

      it contains a prominent warning that such forecasts are not a reliable indicator of future performance.

2. (2)

   This6rule only applies in relation6 to financial promotions that relate to a financial instrument (or a financial index that relates exclusively to financial instruments) or a structured deposit.

1. (1)

   1A firm that communicates to a client a projection for a packaged product which is not a financial instrument2must ensure that the projection complies with the projectionsrules in COBS 13.4, COBS 13.5 and COBS 13 Annex 2.

   2
2. (2)

   A firm must not communicate a projection for a highly volatile product to a client unless the product is a financial instrument.

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

   33
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

This section applies to a firm in relation to the communication of 3a financial promotion that is not in writing, but it does not apply:

1. (1)

   to the extent that the financial promotion is an excluded communication;

2. (2)

   if the financial promotion is image advertising;

3. (3)

   if the financial promotion is a non-retail communication;1

4. (4)

   [deleted]2

   2
5. (5)

   to the extent that the financial promotion relates to a pure protection contract that is a long-term care insurance contract.1

A firm must not make a cold call unless:

1. (1)

   the recipient has an established existing client relationship with the firm and the relationship is such that the recipient envisages receiving cold calls; or

2. (2)

   the cold call relates to a generally marketable packaged product which is not:

   1. (a)

      a higher volatility fund; or

   2. (b)

      a life policy with a link (including a potential link) to a higher volatility fund; or

3. (3)

   the cold call relates to a controlled activity to be carried on by an authorised person or exempt person and the only controlled investments involved or which reasonably could be involved are:

   1. (a)

      readily realisable securities (other than warrants); and

   2. (b)

      generally marketable non-geared packaged products.

A firm must not communicate a solicited or unsolicited financial promotion that is not in writing, to a client3 outside the firm's premises, unless the personcommunicating it:

1. (1)

   only does so at an appropriate time of the day;

2. (2)

   identifies himself and the firm he represents at the outset and makes clear the purpose of the communication;

3. (3)

   clarifies if the client would like to continue with or terminate the communication, and terminates the communication at any time that the client requests it; and

4. (4)

   gives a contact point to any client with whom he arranges an appointment.

1. (1)

   4Subject to (2) and (3), this section applies to a firm in relation to the communication or approval of a financial promotion that relates to the business of an overseas person.4

2. (2)

   This section does not apply to a firm in relation to its MiFID or equivalent third country business.

3. (3)

   4If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:4

   1. (a)

      to the extent that it is an excluded communication;

   2. (b)

      to the extent that it is a prospectus advertisement to which article 22 of the Prospectus Regulation5 applies;

   3. (c)

      if it is image advertising;

   4. (d)

      if it is a non-retail communication;1

   5. (e)

      [deleted]3

      23
   6. (f)

      to the extent that it relates to a pure protection contract that is a long-term care insurance contract.1

A firm must not communicate or approve a financial promotion which relates to a particular relevant investment or relevant business of an overseas person, unless:

1. (1)

   the financial promotion makes clear which firm has approved or communicated it and, where relevant, explains:

   1. (a)

      that the rules made under the Act for the protection of retail clients do not apply;

   2. (b)

      the extent and level to which the compensation scheme will be available, or if the scheme will not be available, a statement to that effect; and

   3. (c)

      if the communicator wishes, the protection or compensation available under another system of regulation; and

2. (2)

   the firm has taken reasonable steps to satisfy itself4 that the overseas person will deal with retail clients in the United Kingdom in an honest and reliable way.

A firm may only2communicate or approve a financial promotion to enter into a life policy with a person who is:

1. (1)

   an authorised person; or

2. (2)

   an exempt person who is exempt in relation to effecting or carrying out contracts of insurance of the class to which the financial promotion relates; or

3. (3)

   an overseas long-term insurer that is entitled under the law of its home country or territory to carry on there insurance business of the class to which the financial promotion relates.

A financial promotion for an overseas long-term insurer, which has no establishment in the United Kingdom, must include:

1. (1)

   the full name of the overseas long-term insurer, the country where it is registered, and, if different, the country where its head office is situated;

2. (2)

   a prominent statement that 'holders of policies issued by the company will not be protected by the Financial Services Compensation Scheme if the company becomes unable to meet its liabilities to them'; and

3. (3)

   if any trustee, investment manager or United Kingdom agent of the overseas long-term insurer is named which is not independent of the overseas long-term insurer, a prominent statement of that fact.

A financial promotion for an overseas long-term insurer which is authorised to carry on long-term insurance business in any country or territory listed in paragraph (c) of the Glossary definition of overseas long-term insurer must also include:

1. (1)

   the full name of any trustee of property of any description which is retained by the overseas long-term insurer in respect of the promoted contracts;

2. (2)

   an indication whether the investment of such property (or any part of it) is managed by the overseas long-term insurer or by another person and the full name of any investment manager;

3. (3)

   the registered office of any such trustee and of any investment manager and of his principal office (if different); and

4. (4)

   where any person in the United Kingdom takes, or may take, any steps on behalf of the overseas long-term insurer to enter into a promoted contract, the following details:

   1. (a)

      the full name of the overseas long-term insurer;

   2. (b)

      the registered office, head office or principal place of business of that person in the United Kingdom; and

   3. (c)

      if there is more than one such person, the principal or main person in the United Kingdom.

If a financial promotion relates to a life policy with an overseas long-term insurer but does not name the overseas long-term insurer by giving its full name or its business name:

1. (1)

   it must include the following prominent statement: "This financial promotion relates to an insurance company which does not, and is not authorised to, carry on in any part of the United Kingdom the class of insurance business to which this promotion relates. This means that the management and solvency of the company are not supervised by the Financial Conduct Authority or the Prudential Regulation Authority. Holders of policies issued by the company will not have the right to complain to the Financial Ombudsman Service if they have a complaint against the company and will not be protected by the Financial Services Compensation Scheme if the company should become unable to meet its liabilities to them"; and

2. (2)

   if it also refers to other investments, it must make this clear.

1. (1)

   Before a firmapproves a financial promotion for communication by an unauthorised person, it must confirm that the financial promotion complies with the financial promotion rules.

2. (2)

   If, at any time after a firm has complied with (1), a firm becomes aware that a financial promotion no longer complies with the financial promotion rules, it must withdraw its approval and notify any person that it knows to be relying on its approval as soon as reasonably practicable.

3. (3)

   When approving a financial promotion, the firm must confirm compliance with the financial promotion rules that would have applied if the financial promotion had been communicated by a firm other than in relation to MiFID or equivalent third country business.

A firm must not approve a financial promotion to be made in the course of a personal visit, telephone conversation or other interactive dialogue.

If a firmapproves a financial promotion in circumstances in which one or more of the financial promotion rules, or the prohibition on approval of promotions for collective investment schemes in section 240(1) of the Act (Restriction on approval), are expressly disapplied, the approval must be given on terms that it is limited to those circumstances.

1. (1)

   A firm (A) will not contravene any of the financial promotion rules if it communicates a financial promotion which has been produced by another person and:

   1. (a)

      A takes reasonable care to establish that another firm (B) has confirmed that the financial promotion complies with the financial promotion rules;

   2. (b)

      A takes reasonable care to establish that it communicates the financial promotion only to recipients of the type for whom it was intended at the time B carried out the confirmation exercise; and

   3. (c)

      so far as A is, or ought reasonably to be, aware:

      1. (i)

         the financial promotion has not ceased to be fair, clear and not misleading since that time; and

      2. (ii)

         B has not withdrawn the financial promotion.

2. (2)

   This rule does not apply in relation to MiFID, equivalent third country or optional exemption business2.

1. (1)

   A firm must make an adequate record of any financial promotion it communicates or approves, other than a financial promotion made in the course of a personal visit, telephone conversation or other interactive dialogue.

2. (2)

   For a telemarketing campaign, a firm must make an adequate record of copies of any scripts used.

3. (2A)

   If a firmcommunicates or approves an invitation or inducement to participate in, acquire, or underwrite a non-mainstream pooled investment which is addressed to or disseminated in such a way that it is likely to be received by a retail client:5

   1. (a)

      the person allocated the compliance oversight function in the firm must make a record at or near the time of the communication or approval6 certifying that the6 invitation or inducement complies with the restrictions set out in section 238 of the Act and in COBS 4.12.3 R, as applicable;5

   2. (b)

      the making of the record required in (a) 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 6invitation or inducement;5

   3. (c)

      when making the record required in (a), 6the firm must make a record of which exemption was relied on for the purposes of the invitation or inducement, together with the reason why the firm is satisfied that that exemption applies;5

   4. (d)

      where the firm relies on an exemption that requires investor certification and warnings to investors, 56the record required in (a) must include a record of any certificate or investor statement (as signed by the investor) and of any warnings or indications required by the exemption;5

   5. (e)

      if the exemption relied on is that for an excluded communication under COBS 4.12.4R (5), the firm must identify in the record required in (a)6 which type of financial promotion defined as an excluded communication corresponds to the 6invitation or inducement6being made, including, where applicable, which article in the Financial Promotion Order or in the Promotion of Collective Investment Schemes Order was relied on for the purposes of the invitation or inducement6, together with the reason why the firm is satisfied that the exemption applies;5

4. (3)

   A firm must retain the record in relation to a financial promotion relating to:

   1. (a)

      a pension transfer, pension conversion, 7pension opt-out or FSAVC, indefinitely;

   2. (b)

      a life policy, occupational pension scheme1, SSAS, personal pension scheme or stakeholder pension scheme, for six years;

   3. (c)

      MiFID or equivalent third country business, for five years; and

   4. (d)

      any other case, for three years.

5. (4)

   4If a communication relates to a firm'sMiFID, equivalent third country or optional exemption business8, this section does not apply:4

   1. (a)

      to the extent that the communication is a third party prospectus;2

   2. (b)

      if it is image advertising;2

   3. (c)

      if it is a non-retail communication.2

6. (5)

   4If a communication relates to a firm's business that is not MiFID or equivalent third country business, this section does not apply:4

   1. (a)

      to the extent that it is an excluded communication;

   2. (b)

      to the extent that it is a prospectus advertisement to which article 22 of the Prospectus Regulation9 applies;

   3. (c)

      if it is image advertising;

   4. (d)

      if it is a non-retail communication;2

   5. (e)

      [deleted]3

      3
   6. (f)

      to the extent that it relates to a pure protection contract that is a long-term care insurance contract2.

1. (1)

   3A firm must not communicate or approve an invitation or inducement to participate in, acquire, or underwrite a non-mainstream pooled 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.

2. (2)

   The restriction in (1) is subject to COBS 4.12.4 R and does not apply to units in unregulated collective investment schemes, which are subject to a statutory restriction on promotion in section 238 of the Act.

3. (3)

   13References to a firm in this section include a TP firm to the extent that this section does not already apply to those TP firms as a result of GEN 2.2.26R.

4. (4)

   13References to a firm in this section include 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.

3A certified high net worth 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 following terms:

“HIGH NET WORTH INVESTOR STATEMENT

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

• I had, throughout the financial year immediately preceding the date below, an annual income to the value of £100,000 or more . Annual income for these purposes does not include money withdrawn from my pension savings (except where the withdrawals are used directly for income in retirement).8
• I held, throughout the financial year immediately preceding the date below, net assets to the value of £250,000 or more. Net assets for these purposes do not include:

1. (a)

   the property which is my primary residence or any money raised through a loan secured on that property; or9

2. (b)

   any rights of mine under a qualifying contract of insurance; or89

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; or89

4. (d)

   any withdrawals from my pension savings (except where the withdrawals are used directly for income in retirement).89

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non-mainstream pooled investments.

Signature:

Date: ”

A certified sophisticated investor is an individual:

1. (1)

   who has a written certificate signed within the last 36 months by a firm confirming he has been assessed by that firm as sufficiently knowledgeable to understand the risks associated with engaging in investment activity in non-mainstream pooled investments; and

2. (2)

   who has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the following terms:

   “SOPHISTICATED INVESTOR STATEMENT

   I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified sophisticated investors and I declare that I qualify as such.

   I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non-mainstream pooled investments.

   Signature:

   Date: ”

3A 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 following terms:

“SELF-CERTIFIED SOPHISTICATED INVESTOR STATEMENT

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

1. (i)

   I can receive promotional communications made by a person who is authorised by the Financial Conduct Authority which relate to investment activity in non-mainstream pooled investments;

2. (ii)

   the investments to which the promotions will relate may expose me to a significant risk of losing all of the property invested.

I am a self-certified sophisticated investor because at least one of the following applies:

1. (a)

   I am a member of a network or syndicate of business angels and have been so for at least the last six months prior to the date below;

2. (b)

   I have made more than one investment in an unlisted company in the two years prior to the date below;

3. (c)

   I am working, or have worked in the two years prior to the date below, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises;

4. (d)

   I am currently, or have been in the two years prior to the date below, a director of a company with an annual turnover of at least £1 million.

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

Signature:

Date: ”

1. (1)

   1This section applies to a firm in relation to a communication to a client, including an excluded communication, that is a marketing communication within the meaning of the UCITS Directive.

2. (2)

   This section does not apply to:

   1. (a)

      image advertising; or

   2. (b)

      the instrument constituting the fund2, the prospectus, the key investor information3 or the periodic reports and accounts of a UCITS scheme4.

      2

1. (1)

   A firm must ensure that a marketing communication that comprises an invitation to purchase units in a UCITS scheme4 and that contains specific information about the scheme:

   1. (a)

      makes no statement that contradicts or diminishes the significance of the information contained in the prospectus and the key investor information document4 for the scheme;

   2. (b)

      indicates that a prospectus exists for the scheme and that the key investor information document4 is available; and

   3. (c)

      specifies where and in which language such information or documents may be obtained by investors or potential investors or how they may obtain access to them.

2. (2)

   Where a UCITS scheme4 may invest more than 35% of its scheme property in transferable securities and money market instruments issued or guaranteed by the United Kingdom or4 an EEA State, one or more of its local authorities, a third country or a public international body to which the United Kingdom or4 one or more EEA States belong, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to the investment policy and indicating the particular states, local authorities4 or public international bodies in the securities of which the scheme intends to invest or has invested more than 35% of its scheme property.

3. (3)

   Where a UCITS scheme4 invests principally in units in collective investment schemes, deposits or derivatives, or replicates a stock or debt securities index in accordance with COLL 5.2.31 R (Schemes replicating an index)4, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to the investment policy.

4. (4)

   Where the net asset value of a UCITS scheme or 4has, or is likely to have, high volatility owing to its portfolio composition or the portfolio management techniques that are or may be used, the firm must ensure that a marketing communication relating to the scheme contains a prominent statement drawing attention to that characteristic.

A firm must ensure that a marketing communication (other than a key investor information document4) relating to a feeder UCITS contains a statement that the feeder UCITS permanently invests at least 85% in value of its assets in units of its master UCITS.

2This section applies to:

1. (1)

   firms;

2. (2)

   TP firms; and

3. (3)

   Gibraltar-based firms,

when approving or communicatingfinancial promotions in relation to speculative illiquid securities.

Throughout this section:

1. (1)

   References to firm include references to a Gibraltar-based firm.

2. (2)

   Gibraltar-based firm has the same meaning as in the Gibraltar Order.

1. (1)

   A firm or a TP firm must not communicate or approve a financial promotion in relation to a speculative illiquid security where that financial promotion is addressed to or disseminated in such a way that it is likely to be received by a retail client.

2. (2)

   The restriction in (1) is subject to COBS 4.14.6R.

Subject to COBS 4.14.5R and COBS 4.14.6R, a firm or TP firm must not communicate or approve a financial promotion which relates to a speculative illiquid security unless it contains:

1. (1)

   a risk warning that complies with COBS 4.14.9R;

2. (2)

   if applicable, the date on which the financial promotion was approved; and

3. (3)

   statements that comply with COBS 4.14.12R disclosing all costs, charges and commission.

The relevant risk warning in COBS 4.14.9R must be:

1. (1)

   prominent;

2. (2)

   contained within its own border and with bold and underlined text as indicated;

3. (3)

   if provided on a website or via a mobile application, statically fixed and visible at the top of the screen even when the retail client scrolls up or down the webpage; and

4. (4)

   if provided on a website, included on each linked webpage on the website.

For the purposes of COBS 4.14.8R(3) the financial promotion must contain:

1. (1)

   a statement which expresses as a percentage the total amount of the capital raised by the issue of the speculative illiquid security which will be paid out in costs, fees, charges and commissions and other expenses to any third party;

2. (2)

   a statement which expresses as a cash sum the percentage referred to in (1) above; and

3. (3)

   in addition to the statements in (1) and (2) above, a statement which provides a breakdown of the actual or potential expenditure to be paid out of an investor’s capital and details of the third party (or parties) who will receive it.

The statements providing the percentage figure in COBS 4.14.12R(1) and the cash sum in COBS 4.14.12R(2) must be:

1. (1)

   prominent;

2. (2)

   contained together within their own border and with bold text;

3. (3)

   immediately follow the most prominent reference to the expected return on the speculative illiquid security; and

4. (4)

   published so that they are clearly legible against a neutral background.

A certified high net worth investor is an individual who has signed, within the period of twelve months ending on the day on which the communication is made, a statement in the following terms:

“HIGH NET WORTH INVESTOR STATEMENT

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of speculative illiquid securities. The exemption relates to high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

I had, throughout the financial year immediately preceding the date below, an annual income to the value of £100,000 or more. Annual income for these purposes does not include money withdrawn from my pension savings (except where the withdrawals are used directly for income in retirement).

I held throughout the financial year immediately preceding the date below, net assets to the value of £250,000 or more. Net assets for these purposes do not include:

1. (a)

   the property which is my primary residence or any money raised through a loan secured on that property; or

2. (b)

   any rights of mine under a qualifying contract of insurance; or

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; or

4. (d)

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

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on speculative illiquid securities.

Signature:

Date:

A certified sophisticated investor is an individual who:

1. (1)

   has a written certificate signed within the last 36 months by a firm or TP firm confirming they have been assessed by that firm or TP firm as sufficiently knowledgeable to understand the risks associated with engaging in investment activity in speculative illiquid securities; and

2. (2)

   has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the following terms:

   “SOPHISTICATED INVESTOR STATEMENT

   I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of speculative illiquid securities. The exemption relates to certified sophisticated investors and I declare that I qualify as such.

   I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on speculative illiquid securities.

   Signature:

   Date: ”

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 following terms:

“I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of speculative illiquid securities. I understand that this means:

1. (i)

   I can receive promotional communications made by a person who is authorised by the Financial Conduct Authority which relate to investment activity in speculative illiquid securities;

2. (ii)

   the investments to which the promotions will relate may expose me to a significant risk of losing all of the property invested.

I am a self-certified sophisticated investor because at least one of the following applies:

1. (a)

   I am a member of a network or syndicate of business angels and have been so for at least the last six months prior to the date below;

2. (b)

   I have made more than one investment in an unlisted company in the two years prior to the date below;

3. (c)

   I am working, or have worked in the two years prior to the date below, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises;

4. (d)

   I am currently, or have been in the two years prior to the date below, a director of a company with an annual turnover of at least £1 million.

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from someone who specialises in advising on speculative illiquid securities.

Signature:

Date: ”

For the purposes of this section, and subject to COBS 4.14.22R to COBS 4.14.24R, a speculative illiquid security is a debenture or preference share which:

1. (1)

   has a denomination or minimum investment of less than £100,000 (or an equivalent amount as defined in COBS 4.14.21R); and

2. (2)

   has been issued, or is to be issued, in circumstances where the issuer or a member of the issuer’s group uses, will use or purports to use some or all of the proceeds of the issue directly or indirectly for one or more of the following:

   1. (a)

      the provision of loans or finance to any person other than a member of the issuer’s group;

   2. (b)

      buying or acquiring specified investments (whether they are to be held directly or indirectly);

   3. (c)

      buying or acquiring investments other than specified investments (whether they are to be held directly or indirectly);

   4. (d)

      buying real property or an interest in real property (whether it is to be held directly or indirectly);

   5. (e)

      paying for or funding the construction of real property.

For the purposes of COBS 4.14.20R(1):

1. (1)

   an equivalent amount in relation to an amount denominated in any currency other than sterling is an amount of equal value denominated wholly or partly in another currency; and

2. (2)

   the equivalent amount is to be calculated at the latest practicable date before (but in any event not more than three business days before) the date of the issue of debentures or preference shares.

A debenture or preference share that does not otherwise fall within COBS 4.14.20R is not a speculative illiquid security by virtue only of the fact that the proceeds of the issue are used to buy or acquire specified investments as part of the ordinary cash management activities or treasury functions of an issuer (or its group) carrying on a general commercial or industrial purpose as defined in COBS 4.14.24R(1).

For the purposes of COBS 4.14.20R, and notwithstanding the exemption for readily realisable securities in COBS 4.14.24R(3)(d), a debenture is also a speculative illiquid security if:

1. (1)

   it meets the conditions set out in COBS 4.14.20R; and

2. (2)

   it:

   1. (a)

      is admitted to official listing on an exchange in the United Kingdom or an EEA State; and

   2. (b)

      is not regularly traded on or under the rules of such an exchange; or

3. (3)

   it:

   1. (a)

      is a newly issued debenture which can be reasonably expected to be admitted to official listing on an exchange in the United Kingdom or an EEA State; and

   2. (b)

      cannot reasonably be expected to be regularly traded on or under the rules of such an exchange when it begins to be traded.

A debenture or preference share is not a speculative illiquid security where one or more of the exemptions in (1), (3) or (4) below applies.

1. (1)

   This exemption applies where:

   1. (a)

      the issuer or a member of the issuer’s group uses the proceeds of the issue for the purpose of the activities in COBS 4.14.20R(2)(c) (buying or acquiring investments other than specified investments), (d) (buying real property or an interest in real property) or (e) (paying for or funding the construction of real property); and

   2. (b)

      the relevant property or investment is or will be used by the issuer or a member of the issuer’s group for a general commercial or industrial purpose which it carries on.

2. (2)

   The exemption in (1) will not apply in respect of a debenture or preference share within COBS 4.14.20R(2) (d) or (e) if the ability of the issuer to pay in relation to the debenture or preference share:

   1. (a)

      any coupon or other income; and/or

   2. (b)

      capital at maturity

   is wholly or predominantly linked to, contingent on, highly sensitive to or dependent on a return generated as a result of the matters referred to in COBS 4.14.20R(2)(d) or (e).

3. (3)

   This exemption applies where the debenture or preference share is:

   1. (a)

      issued, or to be issued, by a credit institution;

   2. (b)

      issued, or to be issued by an investment trust;

   3. (c)

      a non-mainstream pooled investment;

   4. (d)

      a readily realisable security except for a debenture within COBS 4.14.23R; or

   5. (e)

      a P2P agreement.

4. (4)

   This exemption applies where:

   1. (a)

      the issuer is:

      1. (i)

         a property holding vehicle; or

      2. (ii)

         a single-company holding vehicle;

   2. (b)

      any financial promotions made relating to the investment comply with COBS 4.7.7R to COBS 4.7.12G as appropriate; and

   3. (c)

      any financial promotion made relating to a single-company holding vehicle clearly and prominently states which single company the investment relates to.

1. (1)

   For the purposes of COBS 4.14.24R(1)(b), a general commercial or industrial purpose includes the following:

   1. (a)

      a commercial activity, involving the purchase, sale and/or exchange of goods or commodities and/or the supply of services; or

   2. (b)

      an industrial activity involving the production of goods; or

   3. (c)

      a combination of (a) and (b).

2. (2)

   For the purposes of COBS 4.14.24R(1)(b), a general commercial or industrial purpose does not include:

   1. (a)

      investment to generate a pooled return;

   2. (b)

      property development or construction services;

   3. (c)

      hiring, leasing or rental services.