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COBS 8A – Client Agreements – Written Client Contracts for MiFID Services

PostedJune 24, 2025
UpdatedJune 24, 2025
ByAndy

1. Chapter Summary

COBS 8A mandates that firms providing MiFID-related investment or ancillary services must establish formal client agreements. It specifies what must be included in these agreements, when the information must be delivered, and how contractual documentation should be handled. The chapter is crucial to ensure clients clearly understand the terms of services, safeguarding transparency and accountability in client relationships.

2. Applicability

Applies to investment firms conducting MiFID business, including UK firms authorising, advisory, discretionary management, or ancillary services. It also extends to firms operating under optional MiFID exemptions or equivalent third-country regimes. This chapter is not applicable to non-MiFID activities or non-investment firms.

3. Key Rules and Their Meaning

  • COBS 8A.1.1R – Application Scope “This chapter applies to a firm in relation to its MiFID, equivalent third country or optional exemption business.” Indicates that only MiFID-regulated activities require a client agreement.
  • COBS 8A.1.3G – Written Basic Agreement Guidance Firms should enter into a written basic agreement with the client setting out essential rights and obligations. Although guidance (G), this reflects MiFID recital expectations that client agreements are standard. This sets clear mutual expectations.
  • COBS 8A.1.4 UK – Mandatory Client Agreement “Investment firms providing any investment or ancillary service to a client… shall enter into a written basic agreement…” This UK rule enshrines MiFID requirements: agreements must be provided in durable form and include descriptions of services, instruments, and any transaction limitations. For advisory or portfolio management, periodic suitability assessments are needed.
  • COBS 8A.1.5 & 8A.1.6 UK – Pre-Service Information Firms must provide, “in good time before a client … is bound”, the agreement terms and information required under MiFID Regulation Articles 47–50. This means contract and regulatory disclosures must reach clients prior to service commencement.
  • COBS 8A.1.9R – Record Keeping Firms must establish a record including the documents agreed with a client… Firms must maintain documentation of client agreements and service terms, evidencing legal compliance and both parties’ understanding.
  • COBS 8A.1.10 UK – Retention of Records Requires firms to retain client agreements “for at least the duration of the relationship with the client.” This ensures long-term traceability of agreed terms.

4. Interpretation Notes / FCA Expectations

  • Guidance clarifies avoiding duplicate disclosures by referencing MiFID-origin information requirements in COBS 6.1ZA. Firms may include required information in agreements or provide it separately, provided timing and clarity are not compromised.
  • Client agreements may reference existing documents, but must still comply with “fair, clear and not misleading” standards under COBS 2.2A and COBS 13.
  • Record keeping must comply with SYSC 9. The expectation is that firms treat client agreements as living documents, updating as services change or renew.

5. Practical Considerations for Firms

  • Draft a standard template agreement covering services, instrument types, transaction limits, fees, and roles.
  • Integrate regulatory Article 47–50 information—services, firm status, conflicts, costs—into the agreement or supporting materials.
  • Distribute agreements before service begins and ensure clients acknowledge receipt.
  • Implement document version control and store agreements in durable form.
  • Train staff on the timing and content requirements.
  • Schedule periodic reviews to align agreements with any changes in services or client relationships.

6. Related Handbook References

  • COBS 6/C3 – Information disclosure obligations under MiFID
  • COBS 2.2A / COBS 13 – “Fair, clear and not misleading” principle for all communications
  • SYSC 9 – Record-keeping standards
  • PRIN 2A – Underlying Principles such as integrity and transparency
  • MIFIDPRU – Prudential rules for firms providing MiFID services

7. Regulatory Focus / Enforcement Risk

  • The FCA places importance on timely delivery of client agreements; issuing them after service begins can lead to enforcement action.
  • Agreements lacking required disclosures (services, costs, conflicts) may trigger regulatory concern.
  • Poor record-keeping or loss of client agreements increases legal and compliance exposure.
  • Contracts that conflict with PRIIPs, IDD, or other investor information obligations are high-risk for compliance failures.