SIFA 9.6 Terms of business

You are required to provide written terms of business to your customers to explain the terms and conditions on which you intend conducting business with them; and to set out particular issues such as the complaints procedure and payment for services. The requirements for terms of business are included in COB 4.2. If your firm carries on business in relation to packaged products it must also comply with COB 4.3 which covers the contents of the initial disclosure document (IDD) and fees and commission statement (menu). The terms of business do not need to duplicate information in the IDD and menu.

When you provide terms of business to a client it is a useful record for both your client and your firm. It offers protection to clients if they think that a firm did not provide the services that they agreed to, and it offers the firm protection if a client incorrectly queries the services it has provided to them.

The requirement to provide terms of business is in line with Principle 7 (Communications with clients).

You need to give a terms of business document to each investment business customer. This must be provided to the customer 'in good time' before the business is conducted (COB 4.2.5 R). This means that the customer must have enough time to fully consider all the information before they are bound by the contract (COB 4.2.6A G).

The terms of business information does not have to be contained in only one document because you might not know a private customer's investment objectives before you provide him with your terms of business (see COB 4.2.12 R). However, you should ensure that:

• your customers are aware that any separate terms of business documents you give to them collectively amount to being the terms of business; and
• the content is still easy to understand.

We will not approve the content or layout of your terms of business. You should follow the rules and guidance in COB 4.2 (Terms of business and client agreements with customers) when designing the content and in particular the table at COB 4 Annex 2E.

Information is available as follows:

• requirements for terms of business and client agreements: COB 4.2; and
• a list of the general requirements for the content of terms of business: COB 4 Annex 2E.

There are the following other considerations:

• There are times when you need to issue a client agreement (which the client has to sign before it comes into force) instead of a terms of business: COB 4.2.7 R
• There are occasions when you are not required to provide terms of business: COB 4.2.5 R and COB 4 Annex 1R.
• If the terms of business provided to a customer allow you to amend the terms of business without your customer's consent you must give the customer at least 10 business days' notice before conducting business on the amended terms (COB 4.2.13 R)
• A firm can continue to rely on terms of business issued to an existing client under the rules of its previous regulator. However it must also inform such clients in writing of the matters set out at COB 4 Annex 2E Notes 2, 20 and 21 which deal with FSA regulation and the protections available from the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS). If you need to make any amendments to the terms of business, or there is a new client, you must issue new terms.

You must make a record of each terms of business you provide as soon as it comes into force (COB 4.2.14 R).