• CIPR Part 5.3 CIPR Part 5.3 Investment intermediaries (including investment advisers)

    Note
    This Part applies to an investment intermediary (including an investment manager, bank or insurer that is acting as an investment intermediary) that carries on business in or from the QFC — see rule 5.1.1 (3).

    Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.3.1 Initial disclosure document — additional requirements

      (1) After the information required by rule 4.4.2, the initial disclosure document for an authorised firm that proposes to conduct investment mediation business must set out the following information in the following order:
      (a) whether the firm charges on the basis of fees or commissions, or a combination of fees and commissions;
      (b) the fees that the firm would charge a customer or the likely commissions that the firm would earn (or both if relevant) for the business that the firm is offering;
      (c) how the firm will deal with conflicts of interest and material interests;
      (d) guidance on, and appropriate warnings of, the material risks associated with:
      (i) the business that the firm is offering; and
      (ii) any investment strategy that the firm follows.
      (2) If the firm charges fees, the initial disclosure document must state how those fees will be calculated, paid and collected, and how frequently they are to be paid.
      (3) If information about the firm's fees or commissions is not available when the firm gives a customer the initial disclosure document, the firm must give the customer the information in a separate document before the customer becomes contractually bound in relation to the business.

      Guidance

      Information about the relevant fees and commissions cannot be given to the customer on the same date as the customer commits to any contractual obligations.
      (4) The initial disclosure document must contain a statement setting out whether or not the firm is acting independently. The statement must include:
      (a) the names of the product providers whose packaged investment products the firm may sell and give advice on; and
      (b) a list of the categories of their products that the firm may sell and give advice on.
      (5) The initial disclosure document must also set out details of any arrangements with particular product providers that prevent the firm from giving advice on packaged investment products from the whole market (or the whole of the relevant sector of the market).
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.3.2 Investment advice for retail customers — general requirements

      (1) If an authorised firm gives advice on relevant investments to a retail customer:
      (a) the firm must take reasonable steps to ensure that it has sufficient personal and financial information about the customer to give the advice (see rule 5.3.3);
      (b) it must take reasonable steps to ensure that the advice is suitable for the customer, taking into account what the customer has told the firm and anything else that the firm knows or ought reasonably to know about the customer;
      (c) if it recommends a product or service, it must be satisfied that:
      (i) the product or service is appropriate for the customer;
      (ii) the customer is likely to continue to be able to meet the financial commitment associated with the product or service; and
      (iii) the customer is financially able to bear any risks associated with the product or service; and
      (d) the firm must give the customer a statement, in a durable medium, of why it considers the advice to be suitable for the customer.
      (2) The statement must set out the following information:
      (a) the customer's demands and needs;
      (b) an explanation of why the firm has concluded that the advice is suitable for the customer, taking into account the information provided by the customer;
      (c) an explanation of any possible disadvantages that the advice might have for the customer, including the nature of the risks involved.
      (3) An authorised firm must establish systems and controls:
      (a) to ensure that it effectively monitors all investment advice given by its employees;
      (b) to ensure that that advice is appropriate and of high quality; and
      (c) to take any necessary remedial measures in relation to the delivery of that advice.
      (4) The firm must establish a continuous training program that enables the firm's employees who give advice:
      (a) to keep abreast of market trends, economic conditions, innovations and modifications made to the relevant products and services;
      (b) to maintain an appropriate level of knowledge about their industry segment, including the characteristics and risks of the products and services;
      (c) to know the applicable legal and regulatory requirements, including the requirements about:
      (i) the communication of information about the products and services; and
      (ii) appropriately disclosing any situation that might compromise the impartiality of the advice given or limit such advice; and
      (d) to be familiar with the documentation about the products and services and to answer reasonably foreseeable questions.
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.3.3 Investment intermediation and investment advice for retail customers — “know your customer”

      (1) An authorised firm must take reasonable steps to ensure that the information that it has about a retail customer is accurate, complete and up-to-date.
      (2) For rule 5.3.2 (1) (a), the information that an authorised firm obtains about a retail customer must include all of the following (to the extent appropriate to the customer's investment experience, the nature and extent of the service to be provided and the type of product or transaction envisaged, including its complexity and the risks involved):
      (a) the customer's financial situation (for example, the source of his or her income, his or her financial commitments, savings, property and investments, loans or mortgages, and pensions);
      (b) the customer's personal situation and plans (for example, his or her marital status, children, security of employment or term of employment contract, and future plans, including retirement plans);
      (c) the customer's investment objectives, investment horizon and attitude to risk;
      (d) the customer's knowledge of, and experience in, the relevant investment field;
      (e) the nature, volume and frequency of the customer's transactions and the period over which they have been carried out;
      (f) the customer's level of education and his or her profession or former profession.
      (3) If the firm asks the customer for personal or financial information and the customer refuses to give it, the firm must warn the customer in a durable medium that failure to give the information may adversely affect the quality of the service that the firm provides. The firm must retain a record of the customer's refusal.
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.3.4 Investment advice for retail customers — independence

      (1) This rule applies if an authorised firm is providing investment advice to a retail customer in relation to packaged investment products.
      (2) The firm must not hold itself out as acting independently unless:
      (a) it is not party to any arrangements with particular product providers that prevent it from giving advice on packaged investment products from the whole market (or the whole of the relevant sector of the market);
      (b) it gives the advice on packaged investment products from a sufficiently large range of types of products and product providers to enable it to give the advice on the basis of a fair analysis of the market; and
      (c) it offers retail customers the opportunity of paying in full for its services by means of a fee.

      Guidance

      Rule 5.3.4 (2) (c) means that an authorised firm that wishes to hold itself out as independent will need to give retail customers a purely fee-based option for paying for its services. The fee may be offered on a contingent basis so that it does not become payable if the retail customer does not buy a product. An authorised firm offering a fee-based service may, in addition, provide the retail customer with other payment options, for example, by commission.
      (3) If an authorised firm is providing investment advice to a retail customer in relation to a packaged investment product provided by another person:
      (a) the firm must not hold itself out as the provider of the product; and
      (b) the firm must not do or say anything that might reasonably lead the customer to be mistaken about the identity of the product provider (and, if the customer is apparently mistaken about the identity of the provider, the firm must correct the mistake).
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).