COBS 9.3 Guidance on assessing suitability

1. (1)

   A transaction may be unsuitable for a client because of the risks of the designated investments involved, the type of transaction, the characteristics of the order or the frequency of the trading.

2. (2)

   In the case of managing investments, a transaction might also be unsuitable if it would result in an unsuitable portfolio.

1. (1)

   A series of transactions that are each suitable when viewed in isolation may be unsuitable if the recommendation or the decisions to trade are made with a frequency that is not in the best interests of the client.

2. (2)

   A firm should have regard to the client's agreed investment strategy in determining the frequency of transactions. This would include, for example, the need to switch a client within or between packaged products.

When a firm is making a personal recommendation to a retail client about income withdrawals or purchase of short-term annuities, it should consider all the relevant circumstances including:

1. (1)

   the client's investment objectives, need for tax-free cash and state of health;

2. (2)

   current and future income requirements, existing pension assets and the relative importance of the plan, given the client’s financial circumstances;

3. (3)

   the client’s attitude to risk, ensuring that any discrepancy is clearly explained between his attitude to an income withdrawal or purchase of a short-term annuity and other investments.

When considering the suitability of a particular investment product which is linked directly or indirectly to any form of loan, mortgage or home reversion plan, a firm should take account of the suitability of the overall transaction. The firm should also have regard to any applicable suitability rules in MCOB.