Rule on Inducements - COBS Provision

This is the FCA’s general rule on inducements —and more to the point, avoiding them — and as you’ll see it is cast with an eye to the client’s best interests. Compare with specific rules on use of dealing commissions, which some might say are no more than an articulation of these, but others would say are quite a lot more restrictive.

Want to take your client to Wimbledon? Forget about it.

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2.3.1 in a Nutshell™ _{(COBS edition)}

2.3.1 A firm cannot give or take any benefit relating to client business except:

(1) Client Benefits: one the client pays for/receives directly; or

(2) Third Party Benefits: a third party pays/receives if:

(a) No impairment: it does not impair the firm’s duty to act in the client’s best interests; and

(b) Full disclosure: the firm fully discloses it before providing it; and

(c) Service enhancement: it enhances the quality of the firm’s service to the client; or

(3) Ancillary Benefits: one that facilitates designated investment business or ancillary services and doesn’t conflict with the client’s interests (eg custody, clearing or exchange fees, legal fees, etc.)

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Section 2.3.1, COBS Rules

COBS Rules
Template:COBS Section 2.3.1
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Commentary

See also

• COBS 11.6.3 et seq. regarding (Use of dealing commission), and also corporate access.
• 2.3.1 - the Rule on Inducements

Conduct of Business

This is an article about the FCA’s conduct of business rules, known by its chapter in the FCA Sourcebook, COBS, which implement, among other things, MiFID (directive 2004/39/EC (EUR Lex) and implementing directive 2006/73/EC (EUR Lex)).