2)6) Personal Account Dealing (COBS 11.7)

Question 1

6.1 Who do the personal account dealing rules apply to?

Answer 1

Employees who are relevant persons and involved in activities that could lead to conflicts of interest, or who could have access to inside info or other confidential client info

Relevant persons are directors, manager, partners, appointed reps or those carrying out regulated activities
Note: COBS 11.7 does not apply to MiFID business; COBS 11.7A contains the equivalent requirements that apply to a firm carrying on MiFID, equivalent third country or optional exemption business

Question 2

6.1 What are the aims of the Personal Account Dealing (COBS 11.7) rules?

Answer 2

To prevent certain activities when:
- these activities may give rise to conflicts of interest
- the individual involved in these activities has access to inside info, as defined in UK MAR
- the individual involved in these activities has access to other confidential info relating to clients or txns with or for clients

Question 3

6.1 What should the arrangements in place prevent relevant persons from doing? (3)

the relevant provisions are:
- the rules on personal account txns undertaken by financial analysts contained elsewhere in COBS (ie, investment research - COBS 12.2)
- the rules on misuse of info relating to pending client orders

Firms must keep records of all personal txns notified to them, and of any auth or prohibition made in connection with them

Answer 3

• entering into a personal txn that is contrary to MAR, involves misuse or improper disclosure of confidential info, or conflicts with the firm’s duties to a customer
• improperly advising or procuring that anyone else enters into a txn that (if it had been done by the employee themselves) would have fallen foul of the above point or of a relevant provision
• improperly disclosing info or opinion, if they know or should know that the person to whom they have disclosed it is likely to enter into a txn that (if it had been done by the employee themselves) would have fallen foul of the first point or of a relevant provision, or encouraging someone else to do so

Question 4

6.2 How should the arrangements for Personal Accounts Dealing rules be setup? (3)

Answer 4

Employees concerned are aware of the restrictions on personal txns and of the firm’s procedures in this regard
The firm is informed promptly of any such personal txn, either by notification of the txn, or by some other procedure enabling the firm to identify it.
When outsourcing takes place, the arrangements must be such that the outsourcing firm maintains a record of personal txns undertaken by any relevant person and provides it to the firm promptly on request

Question 5

6.2 In which situations are the rules on personal account dealing not applied? (3)

Answer 5

• deals under a discretionary management service, if there is no prior communication between the portfolio manager and the relevant person (or any other person for whose account the txn is being executed) about the deal
• deals in units/shares in certain classes of the fund, if the relevant person (and any other person for whom the deals are effected) is not involved in the management of the fund
• personal txns in life policies