Part 1: What?
Modifications to the general application of COBS according to activities
| 1. | Eligible counterparty business | ||
1.1
| R | The COBS provisions shown below do not apply to eligible counterparty business except, where the eligible counterparty business is in scope of the IDD, those provisions which implemented or derived from the IDD continue to apply. | |
| COBS provision | Description | ||
| COBS 2 (other than COBS 2.1.1AR, COBS 2.2A andCOBS 2.4) | Conduct of business obligations | ||
| COBS 4 (other than COBS 4.2 and COBS 4.4.1 R) | Communicating with clients including financial promotions | ||
| COBS 6.1 | Information about the firm, its services and remuneration (non-MiFID and non insurance distribution provisions) | ||
| COBS 6.1ZA (other than COBS 6.1ZA.11R to COBS 6.1ZA.13R) | Information about costs and charges of different services or products (MiFID provisions) | ||
| COBS 8 | Client agreements (non-MiFID provisions) | ||
| COBS 8A | Client agreements (MiFID provisions) | ||
| COBS 10 | Appropriateness (for non-MiFID and non-insurance-based investment products non-advised services) (non-MiFID and non-insurance-based investment products provisions) | ||
| COBS 10A | Appropriateness (for non-advised services) (MiFID and insurance-based investment products provisions) | ||
| COBS 11.2A , COBS 11.2B andCOBS 11.3 | Best execution, quality of execution and client order handling | ||
| COBS 12.2.18R | Labelling of non-independent research | ||
| COBS 14.3 | Information about designated investments (non-MiFID provisions) | ||
| COBS 14.3A (other than COBS 14.3A.3R) | Information about financial instruments (MiFID provisions) | ||
| COBS 16 | Reporting information to clients (non-MiFID provisions) | ||
| COBS 16A.3 | Occasional reporting: MiFID business | ||
| [Note: paragraphs 1 and 2 of article 30(1) of MiFID] | |||
| 2. | Transactions between an MTF operator and its users | ||
2.1
| R | The COBS provisions (applicable to MiFID business) shown below do not apply to a transaction between an operator of an MTF and a member or participant in relation to the use of the MTF. | |
| COBS provision | Description | ||
| COBS 2 (other than COBS 2.4) | Conduct of business obligations | ||
| COBS 4 (other than COBS 4.4.1R) | Communicating with clients, including financial promotions | ||
| COBS 6.1ZA | Information about the firm and compensation information (MiFID provisions) | ||
| COBS 8A | Client agreements (MiFID provisions) | ||
| COBS 10A | Appropriateness (for non-advised services) (MiFID provisions) | ||
| COBS 11.2A , COBS 11.2B, COBS 11.3 and COBS 11.4 | Best execution, quality of execution, client order handling and client limit orders | ||
| COBS 14.3A | Information about financial instruments (MiFID provisions) | ||
| COBS 16A | Reporting information to clients (MiFID provisions) | ||
| [Note: article 19(4) of MiFID] | |||
| 3. | Transactions concluded on an MTF | ||
3.1
| R | The COBS provisions in paragraph 2.1R do not apply to transactions concluded under the rules governing an MTF between members or participants of the MTF. However, the member or participant must comply with those provisions in respect of its clients if, acting on its clients behalf, it is executing their orders on an MTF. | |
| [Note: article 19(4) of MiFID] | |||
| 3A. | Operators of OTFs | ||
| 3A.1 | G | [deleted] | |
| 4. | Transactions concluded on a regulated market | ||
4.1
| R | In relation to transactions concluded on a regulated market, members and participants of the regulated market are not required to apply to each other the COBS provisions in paragraph 2.1R. However, the member or participant must comply with those provisions in respect of its clients if, acting on its clients behalf, it is executing their orders on a regulated market. | |
| [Note: article 53(4) of MiFID] | |||
| 5. | Consumer credit products | ||
5.1
| R | If a firm, in relation to its MiFID business, offers an investment service as part of a financial product that is subject to other provisions of EU-derived law related to credit institutions and consumer credits with respect to information requirements, that service is not subject to the rules in this sourcebook that implemented articles 24(3), (4) and (5) of MiFID. | |
| [Note: article 24(6) of MiFID] | |||
5.2
| G | This exclusion for consumer credit products is intended to apply on a narrow basis in relation to cases in which the investment service is a part of another financial product. It does not apply where the investment service is the essential or leading part of the financial product. It also does not apply where the service provided is a combination of an investment service and an ancillary service (for example, granting a credit for the execution of an order where the credit is instrumental to the buying or the selling of a financial instrument.) The exclusion also does not apply in relation to the sale of a financial instrument for the purpose of enabling a client to invest money to repay his obligations under a loan, mortgage or home reversion. | |
| 5A. | Mortgages and mortgage bonds | ||
| 5A.1 | R | The rule in paragraph 5A.2R applies in relation to an MCD credit agreement with a consumer which is subject to the provisions concerning the creditworthiness assessment of consumers in Chapter 6 of the MCD (which were transposed in MCOB 11 and MCOB 11A). | |
| 5A.2 | R | If an agreement with a consumer within paragraph 5A.1R has as a pre-requisite the provision to that same consumer of an investment service in relation to mortgage bonds satisfying the conditions in paragraph 5A.3R in order for the loan to be payable, refinanced or redeemed, that investment service is not subject to the rules in this sourcebook which implemented article 25 of MiFID. | |
| 5A.3 | R | The conditions in paragraph 5A.2R are that the mortgage bonds: | |
| (1) | are specifically issued to secure the financing of the MCD credit agreement in paragraph 5A.1R; and | ||
| (2) | have terms which are identical to the MCD credit agreement in paragraph 5A.1R. | ||
| [Note: article 25(7) of MiFID] | |||
| 6. | Use of third party processors in life insurance distribution activities | ||
6.1
| R | If a firm (or its appointed representative or, where applicable, its tied agent) outsources insurance distribution activities to a third party processor: | |
| (1) | the firm must accept responsibility for the acts and omissions of that third party processor conducting those outsourced activities; and | ||
| (2) | any COBS rule requiring the third party processor's identity to be disclosed to clients must be applied as a requirement to disclose the firm's identity; | ||
| unless the third party processor is giving personal recommendations in relation to advising on investments (except P2P agreements) or providing targeted support. | |||
| 7. | Modified meaning of regulated activities for UK AIFMs and UK UCITS management companies | ||
7.1
| R | In determining whether a provision in COBS applies to a UK AIFM or a UK UCITS management company, an activity carried on by the firm which would be a regulated activity but for article 72AA (Managers of UCITS and AIFs) of the Regulated Activities Order, must be treated as a regulated activity carried on by the firm. | |
| 8. | PRIIPs Regulation [deleted] | ||
Part 2: Where?
Modifications to the general application according to location
| 1. | EEA territorial scope rule: compatibility with European law [deleted] | |||
| ||||
| 2. | Business with UK clients from overseas establishments | |||
2.1
| R | (1) | This sourcebook applies to a firm which carries on business with a client in the United Kingdom from an establishment overseas. | |
| (2) | But the sourcebook does not apply to those activities if the office from which the activity is carried on were a separate person and the activity: | |||
| (a) | would fall within the overseas persons exclusions in article 72 of the Regulated Activities Order; or | |||
| (b) | would not be regarded as carried on in the United Kingdom. | |||
2.2
| G | [deleted] | ||
| 3 | Public offer platforms | |||
| 3.1 | R | This sourcebook applies to a firm with respect to its activity of operating a POP whether from an establishment maintained by it in the United Kingdom or overseas. | ||
Part 3: Guidance
| 1. | The main extensions, modifications and restrictions to the general application | |||
1.1
| G | The general application of this sourcebook is modified in Parts 1 and 2 of Annex 1 and in certain chapters of the Handbook. The modification may be an extension of the general application. For example, COBS 4 (Communicating with clients, including financial promotions) has extended the general application. | ||
1.2
| G | [deleted] | ||
| 1.3 | G | Certain chapters of this sourcebook apply only to firms in relation to their MiFID, equivalent third country or optional exemption business and, in some of these chapters, specified insurance distribution activities (sometimes only in relation to insurance-based investment products) while others apply only to firms’ designated investment business which is not MiFID, equivalent third country or optional exemption business or, in some of these chapters, certain insurance distribution activities. | ||
| 1.4 | G | COBS 18 (Specialist regimes) contains specialist regimes which modify the application of the provisions in this sourcebook for particular types of firm and business. To the extent that they are in conflict, the rules in COBS 18 on the application of the provisions in this sourcebook should be understood as overriding any other provision (whether in COBS 1 or an individual chapter) on the application of COBS. | ||
| 2. | The Single Market Directives and other directives [deleted] | |||
| 3. | MiFID: effect on territorial scope [deleted] | |||
| 4. | Insurance Distribution Directive : effect on territorial scope [deleted] | |||
| 5. | Solvency II Directive: effect on territorial scope [deleted] | |||
| 6. | Distance Marketing Directive: effect on territorial scope [deleted] | |||
| 7. | Electronic Commerce Directive: effect on territorial scope [deleted] | |||
| 8. | Investor Compensation Directive [deleted] | |||
| 9. | UCITS Directive: effect on territorial scope [deleted] | |||
10.
| AIFMD: effect on territorial scope [deleted] | |||
| 11. | SRD: effect on territorial scope [deleted] | |||