Law / United Kingdom

Suitability for MiFID business: personal recommendations and decisions to trade, including advice given through an automated or semi-automated system

FCA Handbook, COBS 9A

In force since 3 Jan 2018.

An AI sector rules rule binding private bodies.

Criminal exposure

No

Private right of action

Yes

Enforcement body

Financial Conduct Authority

Instrument type

a regulation made under an act

Obligation class

Governance, Disclosure

Audit expectation

periodic

Who audits it

Self

As of 10 October 2026.

What it requires

• It reaches you if you are a firm that provides investment advice or portfolio management in the course of MiFID, equivalent third country or optional exemption business, or investment advice in relation to an insurance-based investment product (COBS 9A.1.1R; for an insurance-based investment product only the rules that implemented the IDD or derive from the IDD Regulation apply, COBS 9A.1.5R; the chapter does not apply in relation to a targeted support service within the scope of COBS 9B, COBS 9A.1.1AG): when providing investment advice or portfolio management, obtain the necessary information regarding the client's knowledge and experience in the investment field relevant to the specific type of financial instrument or service, financial situation including ability to bear losses, and investment objectives including risk tolerance, and only recommend investment services and financial instruments, or take decisions to trade, which are suitable for the client and in particular in accordance with the client's risk tolerance and ability to bear losses (COBS 9A.2.1R).
• If you provide investment advice or portfolio management services in whole or in part through an automated or semi-automated system, remain responsible for the suitability assessment required by COBS 9A.2; that obligation is not affected by the use of an electronic system in making the personal recommendation or decision to trade (COBS 9A.2.23R).
• Determine the extent of the information to be obtained from a client in light of all the features of the service to be provided, and obtain from the client such information as is necessary to understand the essential facts about the client and to have a reasonable basis for determining that the specific transaction meets the client's investment objectives including risk tolerance, that the client is able financially to bear any related investment risks consistent with those objectives, and that the client has the necessary experience and knowledge to understand the risks involved in the transaction or in the management of the portfolio (COBS 9A.2.4R).
• Take reasonable steps to ensure that the information collected about your clients is reliable, including by ensuring that all tools, such as risk assessment profiling tools or tools to assess a client's knowledge and experience, used in the suitability assessment process are fit-for-purpose and appropriately designed for use with your clients, with any limitations identified and actively mitigated, and that the questions used are likely to be understood by clients and capture an accurate reflection of the client's objectives and needs (COBS 9A.2.9R).
• If you have an on-going relationship with a client, such as by providing on-going advice or portfolio management, have, and be able to demonstrate, appropriate policies and procedures to maintain adequate and up-to-date information about that client to the extent necessary to fulfill COBS 9A.2.4R (COBS 9A.2.10R).
• Have in place, and be able to demonstrate, adequate policies and procedures to ensure that you understand the nature and features, including the costs and risks, of the investment services and financial instruments selected for your clients, and that, taking into account cost and complexity, you assess whether equivalent investment services or financial instruments could meet the client's profile (COBS 9A.2.19R).
• Do not recommend investment services or financial instruments to a client if you have not obtained the information COBS 9A.2.1R requires (COBS 9A.2.13R), and when providing investment advice or portfolio management do not recommend or decide to trade where none of the services or instruments are suitable for the client (COBS 9A.2.20R).
• When providing investment advice or portfolio management to retail clients that involves switching investments, collect the necessary information on the client's existing investments and the recommended new investments and analyze the costs and benefits of the switch, so that you are reasonably able to demonstrate that the benefits of switching are greater than the costs (COBS 9A.2.18R).
• When providing investment advice to a retail client, provide the client, before the transaction is concluded, with a suitability report in a durable medium that outlines the advice given and how the recommendation is suitable for them, and how it meets their objectives and personal circumstances with reference to the investment term required, their knowledge and experience, and their attitude to risk and capacity for loss, except that where the transaction is concluded by a means of distance communication that prevents prior delivery you may provide the report immediately after the client is bound if the client has consented and you have given the client the option of delaying the transaction to receive it in advance (COBS 9A.3.2R and COBS 9A.3.3R).
• If you provide a periodic assessment of suitability, review the suitability of the recommendations given at least annually, and increase the frequency where appropriate by reference to the client's risk profile and the type of financial instruments recommended (COBS 9A.3.9R).

When LexLint raises it

When your app profile says your app provides financial services or makes high-risk automated decisions.

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