Entire Section

  • COB 6.3 COB 6.3 Investment Research and Offers of Securities

    • Application

      • COB 6.3.1 COB 6.3.1

        This section applies to an Authorised Firm preparing or publishing Investment Research.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 6.3.1 Guidance

          Investment Research is seen as a significant potential source of conflicts of interest within an Authorised Firm and therefore an Authorised Firm preparing or publishing investment research is expected to have adequate procedures, systems and controls to manage effectively any conflicts that arise.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 6.3.2 COB 6.3.2

        An Authorised Firm that prepares and publishes Investment Research must have adequate procedures and controls to ensure:

        (a) the effective supervision and management of Investment Analysts;
        (b) that the actual or potential conflicts of interest are proactively managed in accordance with COB section 3.5 ;
        (c) that the Investment Research issued to Clients is impartial; and
        (d) that the Investment Research contains the disclosures described under Rules COB 6.3.3 and COB 6.3.4.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 6.3.2 Guidance

          An Authorised Firm's procedures, controls and internal arrangements, which may include Chinese Walls, should limit the extent of Investment Analysts participation in corporate finance business and sales and trading activities, and ensure remuneration structures do not affect their independence.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • Disclosures in Investment Research

      • COB 6.3.3 COB 6.3.3

        When an Authorised Firm publishes Investment Research, it must take reasonable steps to ensure that the Investment Research:

        (a) clearly identifies the types of Clients for whom it is principally intended;
        (b) distinguishes fact from opinion or estimates, and includes references to sources of data and any assumptions used;
        (c) specifies the date when it was first published;
        (d) specifies the period the ratings or recommendations are intended to cover;
        (e) contains a clear and unambiguous explanation of the rating or recommendation system used;
        (f) includes a distribution of the different ratings or recommendations, in percentage terms:
        (i) for all Investments;
        (ii) for Investments in each sector covered; and
        (iii) for Investments, if any, where the Authorised Firm has undertaken corporate finance business with or for the Issuer over the past 12 months; and
        (g) if intended for use only by a Professional Client or Market Counterparty, contains a clear warning that it should not be relied upon by or distributed to Retail Clients.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 6.3.3 Guidance

          An Authorised Firm may consider including a price chart or line graph depicting the performance of the Investment for the period that the Authorised Firm has assigned a rating or recommendation for that investment, including the dates on which the ratings were revised for the purposes of the requirements such as in (d) and (e) of COB Rule 6.3.3.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

      • COB 6.3.4 COB 6.3.4

        For the purposes of this section, an Authorised Firm must take reasonable steps to ensure that when it publishes Investment Research, and in the case where a representative of the Authorised Firm makes a Public Appearance, disclosure is made of the following matters:

        (a) any financial interest or material interest that the Investment Analyst or a Close Relative of the analyst has, which relates to the Investment;
        (b) the reporting lines for Investment Analysts and their remuneration arrangements where such matters give rise to any conflicts of interest which may reasonably be likely to impair the impartiality of the Investment Research;
        (c) any shareholding by the Authorised Firm or its Associate of 1% or more of the total issued share capital of the Issuer;
        (d) if the Authorised Firm or its Associate acts as corporate broker for the Issuer;
        (e) any material shareholding by the Issuer in the Authorised Firm;
        (f) any corporate finance business undertaken by the Authorised Firm with or for the Issuer over the past 12 months, and any future relevant corporate finance business initiatives; and
        (g) that the Authorised Firm is a Market Maker in the Investment, if that is the case.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RM97/2012 (Made 24th July 2012) [VER20/07-12]

        • COB 6.3.4 Guidance

          The requirements in COB Rule 6.3.4(a) and (b) apply to an Authorised Firm in addition to other requirements in the DFSA Rulebook. For example, an Authorised Firm is required to take reasonable steps to identify actual or potential conflicts of interest and then prevent or manage them under GEN Rule 4.2.7 (Principle 7 – Conflicts of Interest). Further, COB Rule 6.3.2 requires an Authorised Firm to have adequate procedures and controls when it prepares or publishes Investment Research.

          [Added] DFSA RM97/2012 (Made 24th July 2012) [VER20/07-12]

    • Restrictions on Publication

      • COB 6.3.5 COB 6.3.5

        If an Authorised Firm acts as a manager or co-manager of an initial public offering or a secondary offering, it must take reasonable steps to ensure that:

        (a) it does not publish Investment Research relating to the Investment during a Quiet Period; and
        (b) an Investment Analyst from the Authorised Firm does not make a Public Appearance relating to that Investment during a Quiet Period.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 6.3.5 Guidance

          The DFSA does not consider the same conflicts of interest mentioned in this section arise if an Investment Analyst prepares Investment Research solely for an Authorised Firm's own use and not for publication. For example, if the research material is prepared solely for the purposes of the Authorised Firm's proprietary trading then the use of this information would fall outside the restrictions placed on publications.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • Restriction on Own Account Transactions

      • COB 6.3.6 COB 6.3.6

        (1) Unless (2) applies, an Authorised Firm or its Associate must not knowingly execute an Own Account Transaction in an Investment or related Investments, which is the subject of Investment Research, prepared either by the Authorised Firm or its Associate, until the Clients for whom the Investment Research was principally intended have had a reasonable opportunity to act upon it.
        (2) The restriction in (1) does not apply if:
        (a) the Authorised Firm or its Associate is a Market Maker in the relevant Investment;
        (b) the Authorised Firm or its Associate undertakes an Execution-Only Transaction for a Client; or
        (c) it is not expected to materially affect the price of the Investment.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]
        [Amended] DFSA RMI267/2020 (Made 26th February 2020). [VER36/04-20]

        • COB 6.3.6 Guidance

          The exceptions in COB Rule 6.3.6(2) allow an Authorised Firm to continue to provide key services to the market and to its Clients even if the Authorised Firm would be considered to have knowledge of the timing and content of the Investment Research which is intended for publication to Clients, for example when it is impractical for an Authorised Firm to put in place a Chinese Wall because the Authorised Firm has few Employees or cannot otherwise separate its functions.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • Offers of Securities

      • COB 6.3.7

        When an Authorised Firm carries out a mandate to manage an Offer of Securities, it must implement adequate internal arrangements, in accordance with COB section 3.5, to manage any conflicts of interest that may arise as a result of the Authorised Firm's duty to two distinct sets of Clients namely the corporate finance Client and the investment Client.

        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

    • Disclosure

      • COB 6.3.8 COB 6.3.8

        For the purposes of COB Rule 6.3.7, when an Authorised Firm accepts a mandate to manage an Offer, it must take reasonable steps to disclose to its corporate finance Client:

        (a) the process the Authorised Firm proposes to adopt in order to determine what recommendations it will make about allocations for the Offer;
        (b) details of how the target investor group, to whom it is planned to Offer the Securities, will be identified;
        (c) the process through which recommendations are prepared and by whom; and
        (d) (if relevant) that it may recommend placing Securities with a Client of the Authorised Firm for whom the Authorised Firm provides other services, with the Authorised Firm's own proprietary book, or with an Associate, and that this represents a potential conflict of interest.
        Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]

        • COB 6.3.8 Guidance

          It is the DFSA's expectation that an Authorised Firm's procedures to identify and manage conflicts of interest should extend to the allocation process for an offering of Securities.

          Derived from DFSA RM56/2008 (Made 1st July 2008). [VER14/07-08]