3.1.1. General requirement

COB 3 applies to:

• (a) an Authorised Firm communicating with a Client in relation to a Regulated Activity; and/or
• (b) an Authorised Firm communicating or approving a Financial Promotion.

3.1.2. Territorial scope

This chapter COB 3 applies to:

1. (a) any communications of an Authorised Firm to a Client; and/or
2. (b) any Financial Promotions communicated or approved by an Authorised Firm, in relation to a Regulated Activity carried on by an Authorised Firm operating within the jurisdiction of the AIFC as specified in Part 1 of the Framework Regulations.

3.2.1. General requirement

An Authorised Firm must ensure that:

• (a) any communication with a Client in relation to a Financial Product or Financial Service; or
• (b) any Financial Promotion that it communicates or approves, is fair, clear and not misleading.

3.2.2. No avoidance of regulatory liability

Any communication by an Authorised Firm with a Client, or any Financial Promotion that it communicates or approves, must not attempt to limit or avoid any duty or liability it may have to that Client or any other Person under any applicable AIFC Rules or Regulations.

3.2.3. Information to be communicated directly to Client

Where a Rule in COB requires information to be provided to a Client, the Authorised Firm must provide that information directly to the Client and not to another Person, unless it is on the written instructions of the Client.

Guidance: Meaning of "communication"

For the purposes of COB 3, a communication includes, but is not limited to, a Financial Promotion, a client agreement, terms of business, Financial Product terms and conditions, a mandate, power of attorney entered into for the purposes of a Financial Product or Financial Service and any other communication which relates in whole or in part to the provision of a Financial Product or Financial Service.

3.3.1. Prohibition on Financial Promotions

A Person must not make a Financial Promotion in relation to a Regulated Activity carried on an Authorised Firm licensed by the AFSA unless:

1. (a) the Person is an Authorised Firm;
2. (b) the content of the Financial Promotion is approved by an Authorised Firm; or
3. (c) the Financial Promotion is exempt under COB 3.3.3.

Persons who make a Financial Promotion falling within (a), (b) or (c) above shall be "Authorised Promoters" for the purposes of this COB 3.

3.3.2. Financial Promotion by a Representative Office

A Representative Office may make a Financial Promotion only in relation to a Financial Product or Financial Service offered both:

• (a) in a jurisdiction other than the AIFC; and
• (b) by a related party of the Representative Office.

3.3.3. Exempt Financial Promotions

For the purposes of COB 3.3.1(c), a communication is an exempt Financial Promotion if it is:

• (a) directed at and capable of acceptance exclusively by a Person who is believed by the Person making the Financial Promotion, on reasonable grounds, to be a Professional Client or Market Counterparty;
• (b) made to a Person as a result of an unsolicited request by that Person to receive the Financial Promotion;
• (c) made or issued by or on behalf of a government or non-commercial government entity, including a central bank;
• (d) made by a Person in the course of providing legal or accountancy services and may reasonably be regarded as incidental to and a necessary part of the provision of such services;
• (e) included in a Prospectus approved by the AFSA in accordance with MAR; or
• (f) included in any document required or permitted to be published under the Listing Rules.

3.3.4. Other exclusions from the Financial Promotions Prohibition

A Person does not breach the Financial Promotions Prohibition if:

• (a) the Person acts as a mere conduit for the making of the Financial Promotion, such as:

(i) a newspaper or magazine;

(ii) a website carrying third-party banner advertisements;

(iii) a postman or courier;

(iv) a person paid to hand out promotional material to the public and an event venue, unless in each case that Person created the Financial Promotion; or

• (b) the Financial Promotion is not made for a commercial or business purpose.

3.3.5. Content of a Financial Promotion

An Authorised Promoter must ensure that any Financial Promotion that it communicates or approves contains the information in Schedule 5.

3.3.6. Financial Promotions included in other communications

If an Authorised Promoter communicates information to a Client (whether in a document required by these Rules or otherwise), the Person must not include or embed a Financial Promotion in the communication in a way that obscures:

• (a) the objectives or purpose of the communication; or
• (b) the nature or purpose of the Financial Promotion.

3.3.7. Withdrawal of a financial promotion

If an Authorised Promoter becomes aware that a Financial Promotion that it has previously communicated or approved does not comply or no longer complies with this Rule, it must ensure that the Financial Promotion is withdrawn as soon as practicable by either:

• (a) ceasing to make the Financial Promotion and telling any other Person known to be relying on it that the promotion is withdrawn; or
• (b) withdrawing its approval and telling any Person known to be relying on it that the promotion is withdrawn.

3.3.8. Restriction on communicating Financial Promotions

An Authorised Promoter that communicates or approves a Financial Promotion must ensure that:

• (a) the Financial Promotion complies with any applicable AIFC laws, Rules or Regulations;
• (b) any material statements of fact in the Financial Promotion are accurate and up to date;
• (c) it does not distribute a Financial Promotion if it becomes aware that the Financial Product or Financial Service that is the subject of the Financial Promotion is in breach of legal or regulatory requirements;
• (d) any Financial Promotion intended for Professional Clients and/or Market Counterparties is not communicated to any persons who are not Professional Clients and/or Market Counterparties, as appropriate;
• (e) no person communicates or otherwise uses the Financial Promotion on behalf of the Authorised Firm in a manner that amounts to a breach of the requirements in this Rule; and
• (f) the Financial Promotion does not mention an approval or authorisation of the AFSA that has not been given in writing by the AFSA.

3.3.9. Financial promotions for Retail Clients

Before an Authorised Promoter makes or approves a Financial Promotion directed at Retail Clients, it must ensure that the Financial Promotion:

• (a) is accurate and does not emphasise any potential benefits of a specified Financial Product without also giving a fair and prominent indication of any relevant risks;
• (b) is sufficient for the needs of, and presented in a way that is likely to be understood by, the average member of the group to whom it is addressed or by whom it is likely to be received; and
• (c) does not disguise, diminish or obscure important items, statements or warnings.

3.3.10. Comparisons and contrasts

If an Authorised Promoter makes or approves a Financial Promotion that contains a comparison or contrast, it must ensure that:

• (a) the comparison is meaningful and presented in an objective and balanced way;
• (b) the sources of the information used for the comparison are stated; and
• (c) the key facts and assumptions used to make the comparison are included.

3.3.11. Past performance and forecasts

An Authorised Promoter must ensure that any information or representation in a Financial Promotion relating to past performance, or any future forecast based on past performance or other assumptions, which is provided to or targeted at Retail Clients:

• (a) presents a fair and balanced view of the Financial Products or Financial Services to which the information or representation relates;
• (b) identifies, in an easy to understand manner, the source of information from which the past performance is derived and any key facts and assumptions used in that context are drawn; and
• (c) contains a prominent warning that past performance is not necessarily a reliable indicator of future results.

3.4.1. Application

COB 3.4 applies to an Authorised Promoter in relation to the communication to a Retail Client of an Unsolicited Real Time Financial Promotion.

Guidance: Non-application to Professional Clients and Market Counterparties The restrictions on Unsolicited Real Time Financial Promotion in COB 3.4 do not apply to Professional Clients or Market Counterparties because it is expected that these categories of Client are better able to assess the risks of a Financial Product or Financial Service, including when engaging in interactive dialogue with a representative of an Authorised Firm.

3.4.2. Meaning of an Unsolicited Real Time Financial Promotion

A Financial Promotion is considered to be an Unsolicited Real Time Financial Promotion if it is made by way of interactive dialogue:

• (a) which:

(i) was not initiated by the recipient of the Financial Promotion; and

(ii) does not take place in response to an express request from the recipient of the Financial Promotion; or

• (b) in relation to which it was not clear from all the circumstances when the dialogue was initiated or requested, that during the course of the dialogue, communications would be made concerning the kind of controlled activities and controlled investments to which the communications in fact made relate.

Guidance: Examples of Unsolicited Real Time Financial Promotions An Unsolicited Real Time Financial Promotion would normally be expected to involve or require an immediate response from the recipient, such as a personal visit, interactive voice communication (including a telephone conversation), or other interactive dialogue. Unsolicited Real Time Financial Promotions are considered to present higher risks to Retail Clients and therefore require additional safeguards compared with solicited and/or non-real time Financial Promotions. Non-real time Financial Promotions include a letter, email, publication, website, television advertisement, or radio broadcast, which generally lack the interactive element and immediacy of a real time Financial Promotion.

3.4.3. No express request for a real time Financial Promotion

For these purposes, a Person is not to be treated as expressly requesting a real time Financial Promotion:

• (a) because he omits to indicate that he does not wish to engage in any or any further dialogue; or
• (b) because he agrees to standard terms that state that such dialogue will take place, unless he has signified clearly that, in addition to agreeing to the terms, he is willing for them to take place. If the dialogue is initiated or requested by a recipient (R), it is treated as also having been initiated or requested by any other person to whom it is made at the same time as it is made to R if that other recipient is a Family Member of R or expected to engage in any investment activity jointly with R.

3.4.4. Exemption for image advertising

COB 3.4 does not apply if the Financial Promotion consists only of:

• (a) the name of the Authorised Promoter;
• (b) a logo or other image associated with the Authorised Promoter;
• (c) a contact point; and
• (d) a reference to the types of Financial Product or Financial Service provided by the Authorised Promoter, or to its fees.

3.4.5. Restriction on Unsolicited Real Time Financial Promotions

An Authorised Promoter must not make an Unsolicited Real Time Financial Promotion unless the recipient is an existing Client of the Authorised Promoter and the relationship is such that the Authorised Promoter reasonably believes that:

• (a) the recipient understands the risks associated with the relevant Investment; and
• (b) the recipient would expect to be contacted by the Authorised Promoter for the purpose of communicating Financial Promotions in real time; and

3.4.6. Restriction on nature of Investments

An Unsolicited Real Time Financial Promotion must only relate to an Investment that is:

• (a) a government Security; or
• (b) a listed Security that is regularly traded on an Authorised Investment Exchange or other authorised and regulated exchange, except that it is not permitted to communicate a Financial Promotion in real time in relation to Warrants or any Security that embeds a derivative.

3.4.7. Procedure for Unsolicited Real Time Financial Promotions

An Authorised Promoter must not communicate an Unsolicited Real Time Financial Promotion to a Client who is not at the Authorised Promoter's premises, unless the Person communicating it:

• (a) only does so at an appropriate time of the day;
• (b) identifies himself and the firm he represents at the outset and makes clear the purpose of the communication;
• (c) clarifies if the Client would like to continue with or terminate the communication, and terminates the communication at any time that the Client requests it; and
• (d) gives a contact point to any Client with whom he arranges an appointment.

3.5.1. Record keeping requirement

An Authorised Promoter must keep a record of each Financial Promotion that it makes or approves.

3.5.2. Content of records

The record must include at least the following detail:

• (a) the name of the senior Employee who reviewed the Financial Promotion;
• (b) the date the Financial Promotion was made or approved;
• (c) if the Financial Promotion was in writing, a copy of the Financial Promotion; and
• (d) if the Financial Promotion was not in writing, details of the Financial Promotion and its outcome, including a note stating if the Client requested the termination of a real time Financial Promotion. The Authorised Promoter must keep the records for at least 6 years after the Financial Promotion is no longer made.