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).