Use of dealing commission to purchase goods or services - COBS Provision

Section 11.6.3, COBS Rules

COBS Rules
11.6.3 Use of dealing commission to purchase goods or services

(1) An investment manager must not accept goods or services in addition to the execution of its customer orders if it:

(a) executes its customer orders through a broker or another person;

(b) passes on the broker’s or other person's charges to its customers; and

(c) is offered goods or services in return for the charges referred to in (b).

(2) [deleted]

(3) The prohibition under (1) does not apply where:

(a) the investment manager has reasonable grounds to be satisfied that the good or service received in return for the charges in (1)(b) will reasonably assist the investment manager in the provision of its services to its customers, on whose behalf the relevant customer orders are being executed;

(b) the investment manager’s receipt of that good or service in return for the charges in (1)(b) does not, and is not likely to, impair compliance with the duty of the investment manager to act in the best interests of its customers; and

(c) that good or service either:

(i) is directly related to the execution of trades on behalf of the investment manager's customers; or

(ii) amounts to the provision of substantive research.

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Commentary

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)).

Commentary

See also 2.3.1 for the general rule on Inducements. This rule has been the subject of a circular on conflicts of interest circulated in 2012 by the FSA which created some consternation as to whther corporate access could be treated as research for the purposes of COBS 11.6.3.

See also 11.6.8 which gives examples of goods or services that relate to the execution of trades or the provision of research that the FSA does not regard as meeting the requirements of either evidential provisions.

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)).