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COBS 8A.1 Client agreements (MiFID, equivalent third country or optional exemption business)

Application and purpose provisions

COBS 8A.1.1R

1This chapter applies to a firm in relation to its MiFID, equivalent third country or optional exemption business.

COBS 8A.1.2R

Provisions in this chapter marked “UK”2 apply to MiFID optional exemption firms as if they were rules.

COBS 8A.1.3G

In order to provide legal certainty and enable clients to better understand the nature of the services provided, investment firms that provide investment or ancillary services to clients should enter into a written basic agreement with the client, setting out the essential rights and obligations of the firm and the client.

[Note: recital 90 to the MiFID Org Regulation]

Providing a client agreement: retail and professional clients

COBS 8A.1.4UK

2Investment firms providing any investment service or the ancillary service referred to in paragraph 1 of Part 3A of Schedule 2 to the Regulated Activities Order to a client after the date of application of this Regulation shall enter into a written basic agreement with the client, in paper or another durable medium, with the client setting out the essential rights and obligations of the firm and the client. Investment firms providing investment advice shall comply with this obligation only where a periodic assessment of the suitability of the financial instruments or services recommended is performed.

  1. (a) a description of the services, and where relevant the nature and extent of the investment advice, to be provided;

  2. (b) in case of portfolio management services, the types of financial instruments that may be purchased and sold and the types of transactions that may be undertaken on behalf of the client, as well as any instruments or transactions prohibited; and

  3. (c) a description of the main features of any services referred to in paragraph 1 of Part 3A of Schedule 2 to the Regulated Activities Order to be provided, including where applicable the role of the firm with respect to corporate actions relating to client instruments and the terms on which securities financing transactions involving client securities will generate a return for the client.

[Note: article 58 of the MiFID Org Regulation]

General requirement for information to clients

COBS 8A.1.5UK

246(1) Investment firms shall, in good time before a client or potential client is bound by any agreement for the provision of investment services or ancillary services or before the provision of those services, whichever is the earlier to provide that client or potential client with the following information:

  1. (a) the terms of any such agreement;

  2. (b) the information required by Article 47 relating to that agreement or to those investment or ancillary services.

[Note: article 46(1) of the MiFID Org Regulation]

COBS 8A.1.6UK

246(2) Investment firms shall, in good time before the provision of investment services or ancillary services to clients or potential clients, to provide the information required under Articles 47 to 50.

[Note: article 46(2) of the MiFID Org Regulation]

COBS 8A.1.7UK

246(3) The information referred to in paragraphs 1 and 2 shall be provided in a durable medium or by means of a website (where it does not constitute a durable medium) provided that the conditions specified in Article 3(2) are satisfied.

[Note: article 46(3) of the MiFID Org Regulation]

Avoiding duplicate information

COBS 8A.1.8G
  1. (1)

    Articles 47 to 50 of the MiFID Org Regulation require a firm to provide a client with information about:

    1. (a)

      the firm and its services for clients and potential clients (including information on communications, conflicts of interest and authorised status);

    2. (b)

      financial instruments;

    3. (c)

      safeguarding of client financial instruments or client funds; and

    4. (d)

      costs and associated charges.

  2. (2)

    Provided the information referred to in (1) is communicated to a client in good time before the provision of the service, a firm does not need to provide it either separately or by incorporating it in a client agreement.

  3. (3)

    The requirements for firms to provide clients with the information referred to in (1) are set out at COBS 6.1ZA.

[Note: recital 84 to MiFID]

Record keeping: client agreements

COBS 8A.1.9R

A firm must establish a record that includes the document or documents agreed between it and a client which set out the rights and obligations of the parties, and the other terms on which it will provide services to the client.

[Note: article 25(5) of MiFID]

COBS 8A.1.10UK

273 Records which set out the respective rights and obligations of the investment firm and the client under an agreement to provide services, or the terms on which the firm provides services to the client, shall be retained for at least the duration of the relationship with the client.

[Note: article 73 of the MiFID Org Regulation]

COBS 8A.1.11R

For the purposes of this chapter, a firm may incorporate the rights and duties of the parties into an agreement by referring to other documents or legal texts.

[Note: article 25(5) of MiFID]

COBS 8A.1.12G

When considering its approach to client agreements, a firm should be aware of other obligations in the Handbook which may be relevant. These include the fair, clear and not misleading rule, the rules on disclosure of information to a client before providing services (principally in COBS 2.2A, 6.1ZA and 13) and the provisions on record keeping (principally in SYSC 9).