6.1.1. Application

COB 6 applies to an Authorised Firm that executes orders for or on behalf of a Client. The Rules in COB 6 do not apply to an Authorised Firm with respect to any transaction which:

1. (a) it undertakes with a Market Counterparty, except for COB 6.2.9;
2. (b) it carries out for the purposes of managing a Fund of which it is the Fund Manager; or
3. (c) is an Execution-Only Transaction. Where an Authorised Firm executes an Execution-Only Transaction with or for a Client, the Authorised Firm is not relieved from providing best execution in respect of any aspect of that transaction which lies outside the Client’s specific instructions.

6.1.2. Best execution obligation

Subject to COB 6.1.3, when an Authorised Firm executes any transaction with or for a Client in an Investment, it must take all sufficient steps to obtain the best possible result for the Client taking into account the information available, including the following factors:

• (a) price;
• (b) costs;
• (c) speed;
• (d) likelihood of execution and settlement;
• (e) size;
• (f) nature; and
• (g) any other consideration relevant to execution

6.1.3. Best execution with or for Retail Clients

When an Authorised Firm executes a transaction in an Investment for a Retail Client, the best possible result will be determined by reference to the price and other costs, including execution venue fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order.

6.1.4. Specific instructions

When an Authorised Firm executes a transaction in accordance with specific instructions from the Client, it should be treated as having met its best execution obligation in relation to that part of the order covered by those instructions.

6.2.1. Application

The Rules in COB 6.2 do not apply to an Authorised Firm with respect to any transaction which:

• (a) it undertakes with a Market Counterparty; or
• (b) it carries out for the purposes of managing a Fund of which it is the Fund Manager.

6.2.2. General requirement

An Authorised Firm that executes orders on behalf of Clients must ensure that it has in place procedures that provide for the prompt, fair and expeditious execution of orders for a Client, relative to orders for itself or for other Clients.

6.2.3. General obligation in relation to orders for a Client

An Authorised Firm must satisfy the following conditions when executing orders for a Client:

• (a) orders executed for Clients must be promptly and accurately recorded and allocated;
• (b) comparable orders for Clients must be executed sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the Client require otherwise;
• (c) a Retail Client must be informed of any material difficulty relevant to the proper execution of orders promptly when the Authorised Firm becomes aware of the difficulty; and
• (d) make and maintain a record of:

(i) the date and time of the allocation;

(ii) the relevant Investments;

(iii) the identity of each Client concerned; and

(iv) the amount allocated to each Client and to the Authorised Firm recorded against the intended allocation as required by (a).

6.2.4. Aggregation of orders

An Authorised Firm may aggregate an order for a Client with an order for other Clients or with an order for its own account only where:

• (a) it is unlikely that the aggregation will operate to the disadvantage of any Client whose orders have been aggregated;
• (b) the Authorised Firm has disclosed in writing to the Client that his order may be aggregated and that the effect of the aggregation may be to his disadvantage;
• (c) the Authorised Firm has made a record of the intended basis of allocation and the identity of each Client before the order is effected; and
• (d) the Authorised Firm has in place written standards and policies on aggregation and allocation which are consistently applied and should include the policy that will be adopted when only part of the aggregated order has been filled.

6.2.5. Allocation of Investments

Where an Authorised Firm has aggregated a Client order with an order for other Clients or with an order for its own account, and part or all of the aggregated order has been filled, it must:

• (a) promptly allocate the Investments concerned;
• (b) allocate the Investments in accordance with the stated intention; and
• (c) ensure the allocation is done fairly and uniformly by not giving undue preference to itself or to any of those for whom it dealt

6.2.6. Churning

An Authorised Firm must not execute a transaction for a Client in its discretion or advise any Client to transact with a frequency or in amounts to the extent that those transactions might be deemed to be excessive. The onus will be on the Authorised Firm to ensure that such Transactions were fair and reasonable at the time they were entered into.

6.2.7. Timely execution

Once an Authorised Firm has agreed or decided to enter into a transaction for a Client, it must do so as soon as reasonably practical. An Authorised Firm may postpone the execution of a transaction if it has taken reasonable steps to ensure that it is in the best interests of the Client.

6.2.8. Averaging of prices

An Authorised Firm may execute a series of transactions on behalf of a Client within the same trading day or within such other period as may be agreed in writing by the Client, to achieve one investment decision or objective, or to meet transactions which it has aggregated. If the Authorised Firm does so, it may determine a uniform price for the transactions executed during the period, calculated as the weighted average of the various prices of the transactions in the series.

6.2.9. Records of orders and transactions

When an Authorised Firm:

• (a) receives a Client order or in the exercise of its discretion decides upon a transaction;
• (b) executes a transaction; or
• (c) passes a Client order to another Person for execution, it must promptly make a record of the information set out in Schedule 1.

6.3.1. General requirement

An Authorised Firm must, subject to COB 6.3.4, take reasonable steps to ensure that it makes and retains:

• (a) recordings of voice communications, including telephone conversations, other than communications where both parties are physically present; and
• (b) copies of electronic communications, when such communications are with a Client or with another Person in relation to a Transaction, including the receiving or transmitting of related instructions.

6.3.2. Notification to Clients

The Authorised Firm must notify new and existing Clients that relevant voice communications between the Authorised Firm and its Clients in relation to a Transaction will be recorded. The Authorised Firm is only required to inform its Clients once, prior to the provision of any Investment Service to a new Client or when this obligation applies for the first time in relation to an existing Client.

6.3.3. Privately owned equipment

An Authorised Firm must take all reasonable steps to prevent an Employee or contractor from making, sending, or receiving relevant voice and electronic communications on privately owned equipment which the Authorised Firm is unable to record or copy.

6.3.4. Exemption for non-specific communications

The obligation in COB 6.3.1 does not apply in relation to relevant voice and electronic communications which are not intended to lead to the conclusion of a specific Transaction and are general conversations or communications about market conditions.

6.3.5. Record keeping

The records retained under COB 6.3.1 must be:

• (a) kept accessible, such that the Authorised Firm is able to demonstrate that all relevant records are capable of being promptly accessed;
• (b) maintained in comprehensible form or capable of being promptly reproduced; and
• (c) protected from unauthorised alteration.

6.3.6. Length of retention period

Recordings of relevant voice communications and copies of electronic communication recordings must be retained for a minimum of six months.