Chapter 4 Communicating with clients, including financial ...

1 Conduct of Business SourcebookChapter 4 Communicating with clients, including financialpromotionsCOBS 4 : Communicating withSection : Applicationclients, including Release 22l Aug 4 What?..This Chapter applies to a firm:(1) Communicating with a client in relation to its designated investmentbusiness (other than MiFID, equivalent third country or optionalexemption business);(1A) Communicating with a client in relation to its MiFID, equivalent thirdcountry or optional exemption business;(2) Communicating or approving a financial promotion other than:(a) a financial promotion of qualifying credit, a home purchase planor a home reversion plan; or(b) a financial promotion in respect of a non-investment insurancecontract.

2 Or(c) a promotion of an unregulated collective investment scheme thatwould breach section 238(1) of the Act if made by an authorisedperson (firms may not communicate or approve such promotions);or(d) a financial promotion in relation to a credit agreement, aconsumer hire agreement or a credit-related regulated activity; or(e) a financial promotion in relation to a funeral plan contract or aregulated funeral plan activity.(3) when a MiFID investment firm or a credit institution is communicatingin connection with selling, or advising clients in relation to, structureddeposits as specified by n COBS COBS R applies to a firm with respect to the activity of issuingelectronic money.

3 (1) This Chapter applies in relation to an authorised professional firm inaccordance with n COBS 18 (Specialist regimes).(2) This Chapter applies, to a limited extent, in relation to communicatingor approving a financial promotion that relates to a deposit if thedeposit is a structured deposit, cash deposit ISA or cash deposit firm is required to comply with the financial promotion rules in relation toa financial promotion communicated by its appointed representative evenCOBS 4 : Communicating withSection : Applicationclients, including Release 22l Aug 4/3where the financial promotion does not require approval because of theexemption in article 16 of the financial Promotion Order (Exempt persons).

4 [Note: see section 39 of the Act](1) In n COBS R, the defined term " financial promotion" includes:(a) in relation to MiFID, equivalent third country or optionalexemption business, all communications that are marketingcommunications within the meaning of MiFID; and(b) in relation to insurance distribution, all communications that aremarketing communications within the meaning of IDD.(2) In the case of MiFID, equivalent third country or optional exemptionbusiness, certain requirements in this Chapter are subject to anexemption for the communication of a third party prospectus incertain circumstances (see recital 73 of the MiFID Org Regulation).

5 This has a similar effect to the exemption in article 70(1)(c) of theFinancial Promotion Order, which is referred to in the definition of anexcluded communication.(3) In this Chapter financial promotion and direct offer financialpromotion include communications that are marketingcommunications for the purposes of the UCITS firm Communicating with an eligible counterparty should have regard tothe application of COBS to eligible counterparty business (n COBS 1 Annex 1 Part 1).Approving a financial promotion without Communicating it (which includescausing it to be communicated) is not MiFID, equivalent third country oroptional exemption business.

6 Communicating a financial promotion to aperson, such as a corporate finance contact or a venture capital contact, whois not a client within the meaning of n COBS R (1), n COBS R (2) orn COBS R (4) in respect of the MiFID, equivalent third country or optionalexemption business to which the financial promotion relates, is also notMiFID, equivalent third country or optional exemption business. Furtherguidance on what amounts to MiFID business may be found in n PERG reference in this Chapter to MiFID, equivalent third country or optionalexemption business includes a reference to communications that occurbefore an agreement to perform services in relation to MiFID, equivalentthird country or optional exemption business.

7 [Note: see recital 16 to the MiFID Org Regulation]What? Modification relating to the KII rules in this Chapter do not apply in relation to the form or content of akey investor information document, an EEA key investor informationdocument or a NURS-KII 4 : Communicating withSection : Applicationclients, including Release 22l Aug 4/4(1) The KII Regulation specifies in an exhaustive manner the form andcontent of the key investor information document for a UCITS scheme.(2) The form and content of a NURS-KII document is specified byn COLL (Form and content of a NURS-KII document) and inn COLL Appendix 2R (Modifications to the KII Regulation for KII-compliant NURS).

8 [Note: see article 3(1) of the KII Regulation]Where? General (1) In relation to communications by a firm to a client in relation to itsdesignated investment business this Chapter applies in accordancewith the general application rule and the rule on business with UKclients from an overseas establishment (n COBS 1 Annex 1 Part 2paragraph ).(2) In addition, the financial promotion rules apply to a firm in relationto:(a) the communication of a financial promotion to a person insidethe United Kingdom;(b) the communication of a cold call to a person outside the UnitedKingdom, unless:(i) it is made from a place outside the United Kingdom; and(ii) it is made for the purposes of a business which is carried onoutside the United Kingdom and which is not carried on inthe United Kingdom; and(c) the approval of a financial promotion for communication to aperson inside the United Kingdom.

9 [deleted]Firms should note the territorial scope of this Chapter is also affected by:(1) the disapplication for financial promotions originating outside theUnited Kingdom that are not capable of having an effect within theUnited Kingdom (section 21(3) of the Act (Restrictions on financialpromotion)) (see the defined term excluded communication );(2) the exemptions for overseas communicators (see the defined term excluded communication ); and(3) the rules on financial promotions with an overseas element (seen COBS ).COBS 4 : Communicating withSection : Fair, clear and not misleadingclients, including Release 22l Aug 4 , clear and not misleadingcommunicationsThe fair, clear and not misleading (1) A firm must ensure that a communication or a financial promotion isfair, clear and not misleading.

10 (2) This rule applies in relation to:(a) a communication by the firm to a customer in relation todesignated investment business which is not MiFID, equivalentthird country or optional exemption business, other than a thirdparty prospectus;(aa) a communication to an eligible counterparty that is in relation to:(i) MiFID or equivalent third country business other than a thirdparty prospectus; or(ii) insurance distribution;(ab) a communication by the firm to a customer in relation to MiFID,equivalent third country or optional exemption business, otherthan a third party prospectus;(b) a financial promotion communicated by the firm that is not:(i) an excluded communication;(ii) a non-retail communication;(iii) a third party prospectus; and(c) a financial promotion approved by the firm.