COB App 2 COB App 2 Key Information and Client Agreement
COB A2.1 COB A2.1 Key Information and Content of the Client Agreement
COB A2.1.1(a) the core information set out in:(b) where relevant, the additional information required under COB Rule A2.1.3 for
Investment Businessand COB Rule A2.1.4 for Investment Management;(c) the additional terms set out in COB Rules A2.1.5 and A2.1.6 if the Client Agreementrelates to the use of a Crowdfunding Platform; and(d) the additional terms set out in COB Rule A2.1.7 if the Client Agreement relates to Providing Money Services or Arranging or Advising on Money Services.
COB A2.1.2 COB A2.1.2(1) In the case of a
Retail Client, the core information for the purposes of COB A2.1.1(a) is:(a) the name and address of the Authorised Firm, and if it is a Subsidiary, the name and address of the ultimate Holding Company;(b) the regulatory status of the Authorised Firm;(c) when and how the Client Agreementis to come into force and how the agreement may be amended or terminated;(d) sufficient details of the service that the Authorised Firmwill provide, including where relevant, information about any product or other restrictions applying to the Authorised Firmin the provision of its services and how such restrictions impact on the service offered by the Authorised Firm. If there are no such restrictions, a statement to that effect;(e) details of fees, costs and other charges and the basis upon which the Authorised Firmwill impose those fees, costs and other charges;(f) details of any conflicts of interests for the purposes of disclosure under COB Rule 3.5.1(2)(b);(g) details of any Soft Dollar Agreementrequired to be disclosed under Rules COB 3.5.6 and COB 3.5.7; and(h) key particulars of the Authorised Firm's Complaintshandling procedures and a statement that a copy of the procedures is available free of charge upon request in accordance with GEN Rule 9.2.11.(2) In the case of a Professional Client, the core information for the purposes of COB A2.1.1(a) is the information referred to in (1)(a), (b), (c) and (e).
COB A2.1.2 Guidance COB A2.1.2 Guidance
Fee Disclosure for Retail Clients trading in Restricted Speculative Investments1. An Authorised Firm is required, as part of the core information that is included in the Client Agreement under COB App A2.1.2, to disclose all of the detailed fees and charges which a Retail Client will or may incur. An Authorised Firm that Deals in a Restricted Speculative Investment would therefore be expected to disclose under that Rule:(a) any trading commissions charged, whether a general commission or a commission on each trade, e.g. on the opening and closing of a trading account;(b) if the Authorised Firm adds any mark-up to market prices it receives from an external source, thereby increasing the spread for the Retail Client, the amount of that mark-up or, if the amount cannot be pre-determined, a reasonable range specified as precisely as possible for the relevant class of Restricted Speculative Investments that are being offered;(c) any financing charges that are applicable, e.g. daily and overnight financing charges for Restricted Speculative Investments;(d) if the Authorised Firm adds a mark-up when calculating any financing charges, the amount of that mark-up; and(e) any applicable costs and charges to be applied if the Retail Client is seeking to sell or exit early.2. If any material changes are proposed to fees and charges that have been previously disclosed in the Client Agreement, a new fee disclosure statement needs to be given to the Retail Client before making the changes to the fees and charges (see also COB Rule 3.3.3).3. An Authorised Firm providing other Financial Services relating to a Restricted Speculative Investment is also required to disclose the fees, charges and commissions relating to those services.Derived from DFSA RMI299/2021 (Made 21st April 2021). [VER38/09-21]
Additional Information for Investment Business
The additional information required under COB A2.1.1(b) for
Investment Businessis:(a) the arrangements for giving instructions to the Authorised Firmand acknowledging those instructions;(b) information about any agreed investment parameters;(c) the arrangements for notifying the Clientof any Transaction Executedon his behalf;(d) if the Authorised Firmmay act as principal in a Transaction, when it will do so;(e) the frequency of any periodic statements and whether those statements will include some measure of performance, and if so, what the basis of that measurement will be;(f) when the obligation to provide best execution can be and is to be waived, a statement that the Authorised Firmdoes not owe a duty of best execution or the circumstances in which it does not owe such a duty; and(g) where applicable, the basis on which assets comprised in the portfolio are to be valued.
Additional Information for Investment Management Activities
The additional information required under COB A2.1.1(b) where an
Authorised Firmacts as an Investment Manageris:(a) the initial value of the managed portfolio;(b) the initial composition of the managed portfolio;(c) the period of account for which periodic statements of the portfolio are to be provided in accordance with COB section 6.10; and(d) in the case of discretionary investment management activities:(i) the extent of the discretion to be exercised by the Authorised Firm, including any restrictions on the value of any one Investmentor the proportion of the portfolio which any one Investmentor any particular kind of Investmentmay constitute; or that there are no such restrictions;(ii) whether the Authorised Firmmay commit the Clientto supplement the funds in the portfolio, and if it may include borrowing on his behalf:(A) the circumstances in which the Authorised Firmmay do so;(B) whether there are any limits on the extent to which the Authorised Firmmay do so and, if so, what those limits are;(C) any circumstances in which such limits may be exceeded; and(D) any margin lending arrangements and terms of those arrangements;(iii) that the Authorised Firmmay enter into Transactionsfor the Client, either generally or subject to specified limitation; and(iv) where the Authorised Firmmay commit the Clientto any obligation to underwrite or sub-underwrite any issue or offer for sale of Securities:(A) whether there are any restrictions on the categories of Securitieswhich may be underwritten and, if so, what these restrictions are; and(B) whether there are any financial limits on the extent of the underwriting and, if so, what these limits are.
Additional terms for Crowdfunding Platforms
The following terms must be included in a
Client Agreementbetween a Crowdfunding Operatorand a Clientthat is a lender or an investor:(a) the operator's obligations to administer the loan or Investment, including:
(i) how payments made by the borrower,
Issuer, or in respect of a property, will be transferred to the lender or investor; and(ii) steps that will be taken if payments by a borrower, Issuer, or in respect of a property are overdue or the borrower or Issueris in default;(b) if the Clientis a Retail Client, the steps that will be taken by the operator and lender or investor to ensure that the lender or investor complies with any applicable limits relating to the amounts of loans or investments that may be made using the platform;(c) for Investment Crowdfundingor Property Investment Crowdfunding, if the Clientis a Retail Client, that the Clientagrees to sign a risk acknowledgement form each time before he makes an Investmentusing the platform; and(d) the contingency arrangements that the operator will put in place to deal with a platform failure or if the operator ceases to carry on its business.
The following terms must be included in a
Client Agreementbetween a Crowdfunding Operatorand a Clientthat is a borrower, Issueror seller:(a) a restriction on the borrower, Issuer, or seller using any other crowdfunding service to raise funds during the commitment period;(b) a restriction on the borrower, Issuer, or seller any Personthat is Connectedto the borrower, Issuer, or seller lending or financing, or arranging lending or finance for a lender or an investor using the service;(c) a restriction on the borrower, Issuer, or seller advertising its proposal, or soliciting potential lenders or investors, outside the platform during the commitment period;(d) a requirement on the borrower or Issuerto give reasonable advance notice to the operator of any material change affecting the borrower or Issuer, its business or the carrying out of its proposal;(e) the obligations of the borrower or Issuerif there is any material change after funds have been provided; and(f) an obligation on the borrower or Issuerto produce financial statements at least annually.
Additional Information For Money Service Activities
COB A2.1.7An Authorised Firm Providing Money Services or Arranging or Advising on Money Services must include in the Client Agreement:(a) if the Authorised Firm is entitled to unilaterally vary or terminate the Client Agreement, the terms and conditions under which it can do so;(b) the applicable currency, the currency rate (actual or indicative) and all fees and charges relating to a Payment Transaction;(c) if quoted currency rates are indicative, a clear statement that they are ‘indicative rates’; and(d) clear procedures relating to unauthorised or incorrectly executed Payment Transactions, which include that the Client is:(i) not entitled to redress unless he notifies the Authorised Firm without delay and, in any case, no later than six months after the unauthorised or incorrectly executed Payment Transaction; and(ii) liable in full, if he acted fraudulently or with gross negligence.Derived from DFSA RMI267/2020 (Made 26th February 2020). [VER36/04-20]