Application

Part

COBS Conduct of Business Sourcebook

Chapter

Application

Printed on: 14/10/2024

Rulebook at: 01/04/2013

COBS 1

Application

COBS 1.1

The general application rule

01/11/2007

[Note: ESMA has issued guidelines under article 16(3) of the ESMA Regulation on certain aspects of the MiFID suitability requirements which also includes guidelines on conduct of business obligations. See http://www.esma.europa.eu/content/Guidelines-certain-aspects-MiFID-suitability-requirements.]

COBS 1.1.1

This sourcebook applies to a firm with respect to the following activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom:

(1) [deleted]
(2) designated investment business;
(3) long-term insurance business in relation to life policies;

and activities connected with them.

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Modifications to the general application rule

COBS 1.1.2

The general application rule is modified in COBS 1 Annex 1 according to the activities of a firm (Part 1) and its location (Part 2).

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COBS 1.1.3

The general rule is also modified in the chapters to this sourcebook for particular purposes, including those relating to the type of firm, its activities or location, and for purposes relating to connected activities.

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Guidance

COBS 1.1.4

Guidance on the application provisions is in COBS 1 Annex 1 (Part 3).

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COBS 1 Annex 1

Application (see COBS 1.1.2R)

01/11/2007

Part 2: Where?

Modifications to the general application rule according to location

EEA territorial scope rule: compatibility with European law

1.1

(1)

The territorial scope of this sourcebook is modified to the extent necessary to be compatible with European law (see Part 3 for guidance on this).

(2)

This rule overrides every other rule in this sourcebook.

1.2

In addition to the EEA territorial scope rule, the effect of the Electronic Commerce Directive on territorial scope is applied in the fields covered by the 'derogations' in the Annex to that Directive other than the 'insurance derogation' in the fourth indent (see paragraph 7.3 of Part 3 for guidance on this).

[Note: article 3(3) of, and Annex to, the Electronic Commerce Directive]

Business with UK clients from overseas establishments

2.1

(1)

This sourcebook applies to a firm which carries on business with a client in the United Kingdom from an establishment overseas.

(2)

But the sourcebook does not apply to those activities if the office from which the activity is carried on were a separate person and the activity:

(a)

would fall within the overseas persons exclusions in article 72 of the Regulated Activities Order; or

(b)

would not be regarded as carried on in the United Kingdom.

2.2

One of the effects of the EEA territorial scope rule is to override the application of this sourcebook to the overseas establishments of EEA firms in a number of cases, including circumstances covered by MiFID, the Distance Marketing Directive or the Electronic Commerce Directive. See Part 3 for guidance on this.

Part 3: Guidance

The main extensions and restrictions to the general application rule

1.1

The general application rule is modified in Parts 1 and 2 of Annex 1 and in certain chapters of the Handbook. The modification may be an extension of this rule. For example, COBS 4 (Communicating with clients, including financial promotions) has extended the application of the rule.

1.2

The provisions of the Single Market Directives and other directives also extensively modify the general application rule, particularly in relation to territorial scope. However, for the majority of circumstances, the general application rule is likely to apply.

The Single Market Directives and other directives

2.1

This guidance provides a general overview only and is not comprehensive.

2.2

When considering the impact of a directive on the territorial application of a rule, a firm will first need to consider whether the relevant situation involves a non-UK element. The EEA territorial scope rule is unlikely to apply if a UK firm is doing business in a UK establishment for a client located in the United Kingdom in relation to a United Kingdom product. However, if there is a non-UK element, the firm should consider whether:

(1)

it is subject to the directive (in general, directives only apply to UK firms and EEA firms, but the implementing provisions may not treat non-EEA firms more favourably than EEA firms);

(2)

the business it is performing is subject to the directive; and

(3)

the particular rule is within the scope of the directive.

If the answer to all three questions is 'yes', the EEA territorial scope rule may change the effect of the general application rule.

2.3

When considering a particular situation, a firm should also consider whether two or more directives apply.

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