COB 3.5.3 COB 3.5.3(1) An
Authorised Firmmust have systems and controls including policies and procedures to ensure that neither it, nor an Employeeor Associateof it, offers, gives, solicits or accepts inducements such as commissions or other direct or indirect benefits where such inducements are reasonably likely to conflict with any duty that it owes to its Clients.(2) Subject to (3), an Authorised Firmmust, before recommending a financial product as defined in GEN Rule 2.11.1(4) to, or Executing a Transactionfor, a Retail Client, disclose to that Clientany commission or other direct or indirect benefit which it, or any Associateor Employeeof it, has received or may or will receive, in connection with or as a result of the firm making the recommendation or executing the Transaction.(3) An Authorised Firmneed not disclose to a Retail Clientunder (2) any details about inducements where it:(a) believes on reasonable grounds that the Retail Clientis al aware of the relevant inducements;(b) is undertaking an Execution-Only Transactionfor that Retail Client; or(c) is executing a Transactionpursuant to the terms of a Discretionary Portfolio Management Agreementfor that Retail Client.(4) An Authorised Firmmay provide the information required under (2) in summary form, provided it informs the Clientthat more detailed information will be provided to the Clientupon request and complies with such a request.
COB 3.5.3 Guidance
In relation to COB Rule 3.5.3 (1), in circumstances where an
Authorised Firmbelieves on reasonable grounds that the Client'sinterests are better served by a Personto whom the referral is to be made, any commission or other benefit which the firm or any of its Employeesor Associatesreceives in respect of such a referral would not be a prohibited inducement under that Rule.
COB 3.5.4 COB 3.5.4
Authorised Firmmay only accept goods and services under a Soft Dollar Agreementif the goods and services are reasonably expected to:(a) assist in the provision of Investment Businessservices to the Authorised Firm's Clientsby means of:(i) specific advice on dealing in, or on the value of, any Investment;(ii) research or analysis relevant to (i) or about Investmentsgenerally; or(iii) use of computer or other information facilities to the extent that they are associated with specialist computer software or research services, or dedicated telephone lines;(b) provide custody services relating to Investmentsbelonging to, or managed for, Clients;(c) provide services relating to portfolio valuation or performance measurement services; or(d) provide market price services.
COB 3.5.4 Guidance
Authorised Firmshould undertake a thorough assessment of the nature of the goods and services and the terms upon which they are to be provided under a Soft Dollar Agreementto ensure that the receipt of such goods and services provide commensurate value. This is particularly the case if any costs of such goods and services are to be passed through to Clients. Where the Clientbears the cost of the goods and services, the disclosure obligation relating to costs and charges under COB Rule 3.3.2 (see App2) will apply to such costs.
Authorised Firmmust not Dealin Investmentsas Agentfor a Client, either directly or indirectly, through any broker under a Soft Dollar Agreement, unless:(a) the agreement is a written agreement for the supply of goods or services described in COB Rule 3.5.4, which do not take the form of, or include, cash or any other direct financial benefit;(b) Transactionexecution by the broker is consistent with any best execution obligations owed to the Client;(c) the Authorised Firmhas taken reasonable steps to ensure that the services provided by the broker are competitive, with no comparative price disadvantage, and take into account the interests of the Client;(d) for Transactionsin which the broker acts as principal, the Authorised Firmhas taken reasonable steps to ensure that Commissionpaid under the agreement will be sufficient to cover the value of the goods or services to be received and the costs of execution; and
Authorised Firmenters into a Transactionfor or on behalf of a Retail Clientor Professional Client, either directly or indirectly, with or through the agency of another Person, in relation to which there is a Soft Dollar Agreementwhich the Authorised Firmhas, or knows that another member of its Grouphas, with that other Person, it must disclose to its Client:(a) the existence of a Soft Dollar Agreement; and(b) the Authorised Firm'sor its Group'spolicy relating to Soft Dollar Agreements.
COB 3.5.7(1) If an
Authorised Firmor member of its Grouphas a Soft Dollar Agreementunder which either the Authorised Firmor member of its Group Dealsfor a Client, the Authorised Firmmust provide that Clientwith the following information:(a) the percentage paid under Soft Dollar Agreementsof the total Commissionpaid by or at the direction of:(i) the Authorised Firm; and(ii) any other member of the Authorised Firm's Groupwhich is a party to those agreements;(b) the value, on a cost price basis, of the goods and services received by the Authorised Firmunder Soft Dollar Agreements, expressed as a percentage of the total Commissionpaid by or at the direction of:(i) the Authorised Firm; or(ii) other members of the Authorised Firm's Group;(c) a summary of the nature of the goods and services received by the Authorised Firmunder the Soft Dollar Agreements; and(d) the total Commissionpaid from the portfolio of that Client.(2) The information in (1) must be provided to that Clientat least once a year, covering the period since the Authorised Firmlast reported to that Client.