Conduct of business rules changes move to principles-based regulation: implementing MiFID

November 2006

Retail Intermediaries under Article 3

The FSA has published a Consultation Paper (CP) giving proposals for a radical overhaul of the Conduct of Business (COB) rules. The move is aimed at simplifying the detailed regulations and moving to a more “principles-based” type of regulation. Many of the changes are required to implement the EU’s Markets in Financial Instruments Directive (MiFID) for FSA regulated firms and markets. The proposals involve the removal of around half the content of the old rulebook with the end result being a new Conduct of Business rulebook - NEWCOB - which will be substantially shorter. (When the changes become part of the Handbook, the term “COBS” will replace both COB and NEWCOB.)

The paper also puts forward proposals to implement other MiFID related changes to other parts of the Handbook, much of which also needs to be transposed by 31st January 2007. This includes complaints handling, record-keeping, outsourcing of retail portfolio management, training and competence, and non-scope transaction reporting.

FIRMS SHOULD NOT ASSUME THAT, BECAUSE THEY ARE OUTSIDE THE SCOPE OF MIFID, THEY ARE UNAFFECTED BY THESE PROPOSALS.

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