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(1 version)
 
Apr 1 2015 onwards

COB 2.4.5 Guidance



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The definitive version of DFSA handbook text is the PDF version as that is the text of the instrument as made and published by the DFSA.

To view past versions of this module in PDF format, please visit the Archive.

1. The provision of a 'bundle' of financial services may involve different arrangements within different GroupsG . The DFSAG considers that the provision of a 'bundle' of financial services occurs where:
a. several members of a GroupG provide discrete stand-alone financial services to a single Client but do so as part of providing a complete suite of related financial services to that Client. An example would be where one member of the GroupG gives investment advice to the ClientG , another member of the GroupG executes the transaction (based on the advice) relating to a financial product and yet another member of the GroupG is the issuer of that financial product;
b. several members of a GroupG provide different aspects of the same financial service to a single Client; or
c. the bundle comprises any combination of both (a) and (b).
2. A bundle of financial services referred to in 1 above can be project specific. An example is where a number of members within a GroupG providing discrete aspects of expertise that go to facilitate a merger and acquisition project of a ClientG . In such a situation, different members of the GroupG could prepare and provide:
a. advice relating to a proposed restructure;
b. advice relating to financing of the restructure; and
c. arranging credit for financing the restructure.
3. In order to provide flexibility for Authorised FirmsG which are members of a GroupG to provide such bundles of financial services to their Clients in a manner that suits the Client'sG needs and the nature of the service, Rule 2.4.5 sets out the overarching objectives that must be achieved (i.e. outcome based requirements), rather than any detailed requirements. This Rule goes beyond a simple reliance on a 'client classification' made by another member of a GroupG under Rule 2.4.4.
4. Depending on the nature of the arrangement under which GroupG members choose to provide to the same ClientG a bundle of Financial ServicesG , and the nature of the Financial ServicesG involved, the risks associated with such arrangements may vary. Some of the common risks that could arise, and therefore would need to be addressed, include:
a. conflicting legal requirements applicable to the provision of the relevant Financial ServicesG , particularly if the members of the GroupG are located in different jurisdictions; and
b. a ClientG not being able to identify clearly the actual service provider or providers and resulting legal exposure to the ClientG that may arise for all members of the GroupG . To address this risk, it is good practice for each member of the GroupG to set out in writing (e.g. in the client agreement) the services for which it is responsible. See also Rule 3.3.4(3)(b) for the firm's obligations.
5. GEN section 5.3 sets out the systems and controls requirements that apply to all Authorised FirmsG . In order to meet those GEN requirements, an Authorised FirmG relying on Rule 2.4.5 should consider, at a minimum, having the following:
a. a clear description of the GroupG arrangement under which a bundle of financial services is provided – such as which member of the GroupG is responsible for which aspects of the bundle of Financial ServiceG provided to the ClientG , or alternatively, that collective responsibility would be assumed by all or some members of the GroupG ;
b. how the ClientG is classified for the purposes of the relevant Financial ServiceG provided by the firm;
c. identification of where records relating to client classification and Financial Services provided to the ClientG are maintained;
d. which firm, if any, is responsible for the overall bundle of financial services and, if this is not the case, how the accountability for the financial services is apportioned among members within the GroupG ;
e. a client agreement (whether entered into by the Authorised FirmG or by a member of its GroupG under Rule 3.3.4) which adequately covers all the financial services provided to the ClientG , including those provided by the firm; and
f. what the identified risks are and how they are being addressed.
6. See Rule 2.5.3 which requires the provision of unrestricted access to records for demonstrating to the DFSAG due compliance with this Rule.
7. Rule 2.4.5 is not expressly extended to a Branch as it is not a separate legal entity, and hence would generally have greater flexibility than GroupG members providing a bundle of services when providing Financial ServicesG to a ClientG in conjunction with its head office or any other branch of the same legal entity. However, to the extent a Branch operates as a stand-alone entity, it may use the same outcome-based approach reflected in Rule 2.4.5 where it provides any Financial Services to a ClientG in conjunction with its head office or other branches of the same legal entity.
Derived from DFSA RM149/2015 (Made 11th February 2015) [VER24/04-15]