Related provisions for COBS 4.10.5

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COBS 4.10.3GRP
(1) Section 21(1) of the Act (Restrictions on financial promotion) prohibits an unauthorised person from communicating a financial promotion, in the course of business, unless an exemption applies or the financial promotion is approved by a firm. Many of the rules in this chapter apply when a firmapproves a financial promotion in the same way as when a firmcommunicates a financial promotion itself.(2) A firm may also wish to approve a financial promotion that it communicates itself.
COBS 4.12.4RRP
  1. (1)

    3The restriction in COBS 4.12.3 R does not apply if the promotion falls within an exemption in the table in (5) below.

  2. (2)

    A firm may communicate an invitation or inducement to participate in an unregulated collective investment scheme without breaching the restriction on promotion in section 238 of the Act if the promotion falls within an exemption in the table in (5) below.

  3. (3)

    Where the middle column in the table in (5) refers to promotion to a category of person, this means that the invitation or inducement:

    1. (a)

      is made only to recipients who the firm has taken reasonable steps to establish are persons in that category; or

    2. (b)

      is directed at recipients in a way that may reasonably be regarded as designed to reduce, so far as possible, the risk of participation in, acquisition or underwriting of the non-mainstream pooled investment by persons who are not in that category.

  4. (4)

    A firm may rely on more than one exemption in relation to the same invitation or inducement.

  5. (5)

    Title of Exemption

    Promotion to:

    Promotion of a non-mainstream pooled investment which is:

    1. Replacement products and rights issues

    A person who already participates in, owns, holds rights to or interests in, a non-mainstream pooled investment that is being liquidated or wound down or which is undergoing a rights issue. [See Note 1.]

    1. A non-mainstream pooled investment which is intended by the operator or manager to absorb or take over the assets of that non-mainstream pooled investment, or which is being offered by the operator or manager of that non-mainstream pooled investment as an alternative to cash on its liquidation;

    or

    2. Securities offered by the existing non-mainstream pooled investment as part of a rights issue.

    2. Certified high net worth investors

    An individual6 who meets the requirements set out in COBS 4.12.6 R, or a person (or persons) legally empowered to make investment decisions on behalf of such individual6.

    Any non-mainstream pooled investment the firm considers is likely to be suitable for that individual6, based on a preliminary assessment of the client's profile and objectives.

    [See COBS 4.12.5G (2).]

    3. Enterprise and charitable funds

    A person who is eligible to participate or invest in an arrangement constituted under:

    (1) the Church Funds Investment Measure 1958;

    (2) section 96 5or 100 of the Charities Act 2011;

    (3) section 25 of the Charities Act (Northern Ireland) 1964;

    (4) the Regulation on European Venture Capital Funds (‘EuVECAs’); or

    (5) the Regulation on European Social Entrepreneurship Funds (‘EuSEFs’).

    Any non-mainstream pooled investment which is such an arrangement.

    4. Eligible employees

    An eligible employee, that is, a person who is:

    (1) an officer;

    (2) an employee;

    (3) a former officer or employee; or

    (4) a member of the immediate family of any of (1) - (3), of an employer which is (or is in the same group as) the firm, or which has accepted responsibility for the activities of the firm in carrying out the designated investment business in question.

    1. A non-mainstream pooled investment, the instrument constituting which:

    A. restricts the property of the non-mainstream pooled investment, apart from cash and near cash, to:

    (1) (where the employer is a company) shares in and debentures of the company or any other connected company; [See Note 2.]

    (2) (in any case), any property, provided that the non-mainstream pooled investment takes the form of:

    (i) a limited partnership, under the terms of which the employer (or connected company) will be the unlimited partner and the eligible employees will be some or all of the limited partners; or

    (ii) a trust which the firm reasonably believes not to contain any risk that any eligible employee may be liable to make any further payments (other than charges) for investment transactions earlier entered into, which the eligible employee was not aware of at the time he entered into them; and

    B. (in a case falling within A(1) above) restricts participation in the non-mainstream pooled investment to eligible employees, the employer and any connected company.

    2. Any non-mainstream pooled investment, provided that the participation of eligible employees is to facilitate their co-investment:

    (i) with one or more companies in the same group as their employer (which may include the employer); or

    (ii) with one or more clients of such a company.

    5. Members of the Society of Lloyd’s

    A person admitted to membership of the Society of Lloyd's or any person by law entitled or bound to administer his affairs.

    A scheme in the form of a limited partnership which is established for the sole purpose of underwriting insurance business at Lloyd's.

    6. Exempt persons

    An exempt person (other than a person exempted only by section 39 of the Act (Exemption of appointed representatives)) if the financial promotion relates to a regulated activity in respect of which the person is exempt from the general prohibition.

    Any non-mainstream pooled investment.

    7. Non-retail clients

    An eligible counterparty or a professional client.

    Any non-mainstream pooled investment in relation to which the client is categorised as a professional client or eligible counterparty.

    [See Note 4.]

    8. Certified sophisticated investors

    An individual6 who meets the requirements set out in COBS 4.12.7 R, including an individual who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm'sclient6.

    Any non-mainstream pooled investment.

    9. Self-certified sophisticated investors

    An individual6 who meets the requirements set out in COBS 4.12.8 R, including an individual who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm'sclient6.

    Any non-mainstream pooled investment the firm considers is likely to be suitable for that client, based on a preliminary assessment of the client's profile and objectives.

    [See COBS 4.12.5G (2)]

    10. Solicited advice

    Any person.

    Any non-mainstream pooled investment, provided the communication meets all of the following requirements:

    (a) the communication only amounts to a financial promotion because it is a personal recommendation on a non-mainstream pooled investment;

    (b) the personal recommendation is made following a specific request by that client for advice on the merits of investing in the non-mainstream pooled investment; and

    (c) the client has not previously received a financial promotion or any other communication from the firm (or from a person connected to the firm) which is intended to influence the client in relation to that non-mainstream pooled investment. [See Note 3.]

    11. Excluded communications

    Any person.

    Any non-mainstream pooled investment, provided the financial promotion is an excluded communication.

    [See COBS 4.12.12 G and COBS 4.12.13 G.]

    12. Non-recognised UCITS

    Any person.

    Any EEA UCITS scheme which is not a recognised scheme, provided the following requirements are met:

    (1) the firm considers it is likely to be suitable for that client based on a preliminary assessment of the client's profile and objectives; and

    (2) the firm provides that client with the same product information as it would be required to provide by COBS 14.2 if the scheme was a recognised scheme.

    [See COBS 4.12.5G (2).]

    13. US persons

    A person who is classified as a United States person for tax purposes under United States legislation or who owns a US qualified retirement plan.

    Any investment company registered and operated in the United States under the Investment Company Act 1940.

    The following Notes explain certain words and phrases used in the table above.

    Note 1

    Promotion of non-mainstream pooled investments to a category of person includes any nominee company acting for such a person.

    Note 2

    A company is 'connected' with another company if:

    • they are both in the same group; or
    • one company is entitled, either alone or with another company in the same group, to exercise or control the exercise of a majority of the voting rights attributable to the share capital, which are exercisable in all circumstances at any general meeting of the other company or of its holding company.

    Note 3

    A person is connected with a firm if it acts as an introducer or appointed representative for that firm or if it is any other person, regardless of authorisation status, who has a relevant business relationship with the firm.

    Note 4

    In deciding whether a promotion is permitted under the rules of this section or under section 238 of the Act, firms may use the client categorisation regime that applies to business other than MiFID or equivalent third country business. (This is the case even if the firm will be carrying on a MiFID activity at the same time as or following the promotion.)