Rule on Inducements - COBS Provision

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.)

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)).