5.2.1. Requirement to assess suitability

When Advising on Investments or Managing Investments for a Client or Providing Trust Services, an Authorised Firm must take reasonable steps to ensure that any recommendation of a service or recommendation or decision to trade on behalf of a Client is suitable for the Client.

5.2.2. Nature of suitability assessment

When making its recommendation of a service or recommendation or decision to trade on behalf of a Client, the Authorised Firm must assess the Client's:

1. (a) investment or other objectives;
2. (b) financial situation; and
3. (c) knowledge and experience in relation to the type of Investment or Investment Service concerned, so as to ensure that the recommendation or decision to trade is suitable for that particular Client.

5.2.3. Investment objectives

The Authorised Firm must assess the Client's investment objectives by, where appropriate, considering the length of time for which the Client intends to hold Investments, and taking into account the Client's risk profile and tolerance for risk, and the purpose of the relevant Investment.

5.2.4. Financial situation

The Authorised Firm must assess the Client's financial situation by, where appropriate, requesting information on the source and extent of the Client's income, assets, Investments, Real Property, and any regular financial commitments or liabilities.

5.2.5. Knowledge and experience

The Authorised Firm must consider the Client's knowledge and experience by taking into account, to the extent appropriate for the circumstances:

• (a) the types of Investment, Investment Service and Transaction with which the Client is familiar;
• (b) the nature, volume, and frequency of the Client’s Transactions in Investments and the period over which they have been carried out;
• (c) the level of education, and profession or relevant former profession of the Client; and
• (d) the Client's knowledge and understanding of any associated risks.

5.2.6. Insufficient information

If an Authorised Firm does not obtain sufficient information to assess suitability for the purposes of COB 5.2.2, the Authorised Firm must not recommend an Investment or Investment Service, or make a decision to trade.

5.2.7. Professional Clients

An Authorised Firm may assume, when making a recommendation, or decision to trade, for or on behalf of a Professional Client, that:

• (a) the Client has the necessary knowledge and experience for the purposes of COB 5.2.2(c); and
• (b) if the Client is a Deemed Professional Client, the Client has an adequate financial situation and the necessary knowledge and experience for the purposes of COB 5.2.2(b) and (c).

5.2.8. Firms providing trust services

An Authorised Firm Providing Trust Services does not have to assess the Client's knowledge and experience or risk tolerance when assessing the suitability of the service to a particular Client, because these considerations are not considered to be relevant to the Regulated Activity of Providing Trust Services.

5.2.9. Suitability reports

When Advising on Investments for a Retail Client, an Authorised Firm must provide the Client with a suitability report that must include:

• (a) an outline of the advice given;
• (b) an explanation of why the recommendation is suitable, including how it meets the client's objectives and personal circumstances; and
• (c) a statement bringing to the client's attention the need for periodic review of suitability (where relevant).