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COBS 3 – Communications with Clients and Financial Promotions

PostedJune 24, 2025
UpdatedJune 24, 2025
ByAndy

1. Chapter Summary

COBS 3 governs the rules and standards for all communications firms make with clients, including financial promotions. The chapter ensures that communications are clear, fair, and not misleading, thereby protecting consumers from deceptive marketing or unsuitable information. It plays a key role in maintaining transparency and trust in the financial services industry by setting out detailed requirements for content, format, and disclosure in promotional and informational materials.

2. Applicability

This chapter applies to all firms communicating with retail and professional clients about regulated financial products or services. It covers both unsolicited and solicited communications, including advertising, marketing materials, and direct client communications. Some specific rules apply differently to retail versus professional clients, and MiFID-related communications may have additional requirements elsewhere.

3. Key Rules and Their Meaning

  • COBS 3.1.1R – General Principle on Communications “A firm must ensure that all communications with clients are clear, fair, and not misleading.” This rule requires firms to avoid ambiguity or exaggeration in any client communication. Practically, firms must use plain language, avoid technical jargon without explanation, and present balanced information.
  • COBS 3.3.1R – Financial Promotions “Financial promotions must be identifiable as such and include all necessary information for clients to make informed decisions.” Firms must clearly label promotional materials and provide sufficient detail on risks, costs, and benefits so the client can assess suitability.
  • COBS 3.4.1R – Risk Warnings and Disclosures Financial promotions must include appropriate risk warnings, tailored to the product type and client category. This is crucial to ensure that consumers understand the risks before committing.
  • COBS 3.5.1R – Record-Keeping for Communications Firms must keep records of all financial promotions and communications made to clients to demonstrate compliance and for FCA oversight.
  • COBS 3.6.1R – Communications to Retail Clients There are stricter requirements for retail client communications, including clear presentation of costs, performance illustrations, and suitability statements.

4. Interpretation Notes / FCA Expectations

  • The FCA expects firms to take a customer-centric approach, considering the target audience’s level of financial knowledge.
  • Communications must avoid omissions that could mislead by leaving out material information.
  • The guidance highlights the importance of balancing positive and negative aspects of products and services.
  • Promotional content should be easily distinguishable from impartial information or advice.

5. Practical Considerations for Firms

  • Develop and implement communication policies ensuring content is vetted for clarity and compliance before release.
  • Use standard templates and disclaimers for financial promotions, regularly updated to reflect regulatory changes.
  • Train marketing and client-facing staff on regulatory expectations.
  • Keep detailed records of all promotional materials, versions, and approvals.
  • Monitor client feedback and complaints related to communications to identify potential issues early.

6. Related Handbook References

  • COBS 2 – Treating Customers Fairly and Managing Conflicts (overlaps on fairness in promotions)
  • COBS 10 – Client Money and Assets (relevant for disclosures about financial protections)
  • PRIN 2A – Principles for Businesses (overall fairness and transparency)
  • SYSC – Systems and Controls (controls around marketing and communications)
  • MIFIDPRU – For MiFID-specific marketing rules where applicable

7. Regulatory Focus / Enforcement Risk

  • Misleading or deceptive financial promotions are a frequent cause of FCA enforcement actions.
  • Firms failing to provide clear risk warnings or presenting unbalanced information face heightened scrutiny.
  • The FCA monitors complaints and market communications closely, with increased attention on digital and social media promotions.