Accepting customers
The firm needs to make reasonable steps to determine if the customer is a private customer, and intermediate customer or a market counter party. This may be clear from how the financial promotion is worded, since it may only be available to one type of customer. The need to know this is because the COB rules differ depending on the status of the customer and bi annual statistics need to be provided to the FSA.
A firm can treat a private customer as an intermediate customer if that customer agrees to be treated as such and so long as they have been warned on any protection lost and have agreed to that loss of protection.
Terms of business
An authorised firm must provide a customer with its terms of Business before conducting business with that customer or within five working days when the transaction is handled over the telephone and immediate cover is requested by the customer.
Full client agreement should be provided to all private customers for:
- Discretionary investment management
- Contingent liability investments
- Stock lending
Terms of business or client agreements do not need to be produced for:
- Execution only transactions
- Direct offer financial promotions
- Life office selling life and pensions policies
- Collective investment scheme operators selling units in their scheme
Terms of business documents and client agreements need to adequately cover the working details between authorised firm and customer and will probably include the following items:
- Commencement
- Regulation by the FSA
- Investment objectives
- Restrictions
- Services provided
- Payment
- Polarisation status
- The giving of instructions
- Accounting
- Withdrawal rights
- Conflicts of interest
- Risk warning
- Complaints
- Compensation
- Termination
A record of the Terms of Business must be kept for each client.