2.2) Client Agreements

Question 1

Client agreements: Designated investment business

Answer 1

The requirement to enter into a client agreement applies to designated investment business for a retail client and for MiFID business and ancillary services or equivalent third country business carried on for a professional client

(It does not apply to insurance firms issuing life policies as principal)

Question 2

Client agreement: written basic agreement

Answer 2

Firms must enter into a written basic agreement with the client, setting out the essential rights and obligations of the firm and its client

(The agreement has to be on paper or other durable medium)

Question 3

Client agreements: before the agreement

Answer 3

In good time before a retail client is bound by the agreement, or before the provision of investment services, (whichever is earlier) firms must provide the client with the:

• terms of any such agreement, and
• information about the firm and its services relating to that agreement or those services required by COBS 6.1.4 and COBS 6.1ZA.2, including authorised communications, conflicts of interest and the firms authorised status

Question 4

Distance Communications

Answer 4

If the client requests the use of distance communications and the firm complies with rules on voice telephony communications, a firm may provide the agreement and the information immediately after the client is bound by any such agreement

Question 5

Client agreements: Material change

Answer 5

Firms have to notify the client of any material change to terms in the client agreement, again, in good time before the change takes effect, and in a durable medium

Question 6

Client agreement records

Answer 6

• five years
• the duration of the relationship with the client, or
• in the case of a pension transfer, pension opt-outs or freestanding additional voluntary contributions indefinitely